This document discusses depreciation and plant and equipment assets over multiple pages. It defines depreciation as allocating the cost of tangible assets over their period of use. It also discusses the matching principle of offsetting revenue with the costs of services provided. The document covers categories of plant and equipment assets, determining their costs, capital vs operating expenditures, disposal of assets, and gains/losses. It also defines intangible assets such as goodwill and patents.
This document discusses life cycle costing and product life cycles. It begins by explaining that life cycle costing involves tracking costs over a product's entire lifespan from development through maturity and decline. It then outlines the typical phases of a product life cycle: development, introduction, growth, maturity, and decline. Several key aspects of life cycle costing are explained, including that costs are accumulated over the entire lifespan rather than just production costs. The document provides an illustration of calculating the cost per unit over a solar panel's life cycle to determine the appropriate price. It concludes by discussing how to maximize returns through various strategies like minimizing costs and time to market.
This document defines and explains various accounting concepts related to asset valuation over time. It defines depreciation as a non-cash expense that reduces the value of an asset over its useful life. It then describes different depreciation calculation methods like straight-line, sum-of-years digits, and declining balance. The document also discusses amortization, write-offs, and sinking funds which are methods used to allocate capital costs over a period of time. Examples are provided to illustrate how to calculate depreciation and amortization using different formulas and rates.
This document summarizes the key aspects of Accounting Standard AS-6 on depreciation accounting in India. It defines depreciation and explains how it is allocated over the useful life of a depreciable asset. It covers the applicability of AS-6, methods of calculating depreciation, factors affecting depreciation, and disclosure requirements regarding depreciation policies and amounts in financial statements. The document also discusses accounting treatments for changes in depreciation methods or estimates of useful life.
Depreciation accounting is used to allocate the cost of a tangible asset over its estimated useful life. It is a non-cash expense that is deducted each year from the profit and loss account. There are two main methods for calculating depreciation - the straight line method, which evenly allocates the cost minus the estimated scrap value over the life of the asset, and the diminishing balance method, which allocates a higher proportion of depreciation in early years. The accounting treatment is to debit the depreciation expense each period and credit the accumulated depreciation account.
Fixed tangible assets include land, buildings, plant and machinery, equipment, furniture, vehicles, and leasehold improvements. The cost of fixed assets includes the purchase price plus any additional expenditures incurred until the asset is ready for its intended use. Fixed assets are depreciated over their useful lives to match the cost to the periods benefited from use. Depreciation methods include straight line and written down value and aim to reflect the asset's declining value each year.
Overhead costs are indirect expenses that are incurred in addition to direct material and direct labor costs. They include indirect materials, indirect labor, and indirect expenses. Overheads must be classified, collected, allocated to cost centers, and then absorbed or charged to production units. They are classified as factory, office/administrative, or selling/distribution overheads. Overhead allocation involves allotting whole costs to cost centers, while apportionment involves allotting proportionate shares of common costs between cost centers. Absorption of overheads involves charging production with an equitable share of overhead costs using an absorption rate.
This document discusses product life cycle costing. It describes the five phases a product goes through - introduction, growth, maturity, saturation, and decline. For each phase, it outlines the typical costs, sales, profits, competition levels, and marketing strategies. It also discusses how to calculate total costs over a product's entire lifecycle from design through withdrawal. This includes factors like acquisition, operating, disposal and hidden costs. Tracking product life cycle costs provides a framework for managing expenses throughout the development and sale of a product.
The document discusses the balance sheet, including its purpose, format, asset and liability valuation methods, and analysis. A balance sheet summarizes a business's financial condition at a point in time by listing assets, liabilities, and owner equity. Liquidity measures a business's ability to meet short-term obligations, while solvency measures the degree to which liabilities are backed by assets. Key ratios like current ratio, working capital, debt/asset ratio, and debt/equity ratio are used to analyze a business's balance sheet.
This document discusses life cycle costing and product life cycles. It begins by explaining that life cycle costing involves tracking costs over a product's entire lifespan from development through maturity and decline. It then outlines the typical phases of a product life cycle: development, introduction, growth, maturity, and decline. Several key aspects of life cycle costing are explained, including that costs are accumulated over the entire lifespan rather than just production costs. The document provides an illustration of calculating the cost per unit over a solar panel's life cycle to determine the appropriate price. It concludes by discussing how to maximize returns through various strategies like minimizing costs and time to market.
This document defines and explains various accounting concepts related to asset valuation over time. It defines depreciation as a non-cash expense that reduces the value of an asset over its useful life. It then describes different depreciation calculation methods like straight-line, sum-of-years digits, and declining balance. The document also discusses amortization, write-offs, and sinking funds which are methods used to allocate capital costs over a period of time. Examples are provided to illustrate how to calculate depreciation and amortization using different formulas and rates.
This document summarizes the key aspects of Accounting Standard AS-6 on depreciation accounting in India. It defines depreciation and explains how it is allocated over the useful life of a depreciable asset. It covers the applicability of AS-6, methods of calculating depreciation, factors affecting depreciation, and disclosure requirements regarding depreciation policies and amounts in financial statements. The document also discusses accounting treatments for changes in depreciation methods or estimates of useful life.
Depreciation accounting is used to allocate the cost of a tangible asset over its estimated useful life. It is a non-cash expense that is deducted each year from the profit and loss account. There are two main methods for calculating depreciation - the straight line method, which evenly allocates the cost minus the estimated scrap value over the life of the asset, and the diminishing balance method, which allocates a higher proportion of depreciation in early years. The accounting treatment is to debit the depreciation expense each period and credit the accumulated depreciation account.
Fixed tangible assets include land, buildings, plant and machinery, equipment, furniture, vehicles, and leasehold improvements. The cost of fixed assets includes the purchase price plus any additional expenditures incurred until the asset is ready for its intended use. Fixed assets are depreciated over their useful lives to match the cost to the periods benefited from use. Depreciation methods include straight line and written down value and aim to reflect the asset's declining value each year.
Overhead costs are indirect expenses that are incurred in addition to direct material and direct labor costs. They include indirect materials, indirect labor, and indirect expenses. Overheads must be classified, collected, allocated to cost centers, and then absorbed or charged to production units. They are classified as factory, office/administrative, or selling/distribution overheads. Overhead allocation involves allotting whole costs to cost centers, while apportionment involves allotting proportionate shares of common costs between cost centers. Absorption of overheads involves charging production with an equitable share of overhead costs using an absorption rate.
This document discusses product life cycle costing. It describes the five phases a product goes through - introduction, growth, maturity, saturation, and decline. For each phase, it outlines the typical costs, sales, profits, competition levels, and marketing strategies. It also discusses how to calculate total costs over a product's entire lifecycle from design through withdrawal. This includes factors like acquisition, operating, disposal and hidden costs. Tracking product life cycle costs provides a framework for managing expenses throughout the development and sale of a product.
The document discusses the balance sheet, including its purpose, format, asset and liability valuation methods, and analysis. A balance sheet summarizes a business's financial condition at a point in time by listing assets, liabilities, and owner equity. Liquidity measures a business's ability to meet short-term obligations, while solvency measures the degree to which liabilities are backed by assets. Key ratios like current ratio, working capital, debt/asset ratio, and debt/equity ratio are used to analyze a business's balance sheet.
The document defines depreciation as allocating an asset's depreciable amount over its estimated life. Depreciation aims to match revenues and expenses to determine profit and spread an asset's cost over the periods it benefits the company. Depreciable assets are used for more than one period, have a finite life, and are held for business use. Non-depreciable assets include land and some investment property. Methods of depreciation include straight-line, units-of-production, and declining balance, with each calculating depreciation expense differently over the asset's estimated useful life.
A customer-centric costing system that bases all cost workings for a product from its market price. The purpose is to reduce cost of a product as low as possible to arrive at a price that would be either equal to or less than that of competitors’ product while delivering the same functionality.
This document defines depreciation as the reduction in the value of an asset due to wear and tear, usage, or obsolescence over time. It discusses the allocation of an asset's cost over its useful life, with depreciation being a non-cash expense. Various methods of calculating depreciation are presented, along with factors that determine the depreciation amount such as the asset's cost, useful life, and salvage value. The document also notes disclosure requirements for depreciation in financial statements and regulations around changing depreciation methods.
This document discusses the valuation and accounting of inventory. It defines inventory as assets held for sale, in production, or as supplies. Inventory should be valued at the lower of cost or net realizable value. Cost includes all purchase costs, conversion costs like direct labor and allocated overheads, and other costs to bring inventory to its present condition. Common costing methods are specific identification, FIFO, and weighted average. Disclosures include accounting policies and total inventory carrying amounts.
Depreciation is the gradual decrease in the economic value of capital assets over time due to wear and tear or obsolescence. It is a cost allocation process that matches the cost of operational assets with the periods benefited from their use. There are several methods for calculating depreciation for accounting and tax purposes, including straight-line, sum-of-the-years digits, and sinking fund methods. Tax systems also have specific rules around capital allowances, tax lives of assets, additional first-year depreciation deductions, and real property depreciation.
The document defines depreciation as the allocation of the depreciable amount of an asset over its estimated useful life. The objectives of depreciation are to match expenses with revenues and allocate the cost of an asset over the periods it benefits the company. Assets are depreciable if they are used for more than one accounting period and have a finite useful life. Common depreciation methods include straight-line, reducing balance, and production output. Capital expenditures extend the life or increase the value of an asset while revenue expenditures are consumed within an accounting period.
1) Intangible assets are non-physical assets that provide long-term benefits to a company such as patents, copyrights, and goodwill.
2) The costs of intangible assets are capitalized and amortized over the shorter of their legal or economic useful life. Amortization expense is recorded systematically over time.
3) Examples of intangible assets include patents, copyrights, trademarks, goodwill, franchises, and research and development costs. The accounting treatment depends on whether the asset was internally generated or purchased.
This document provides an overview of depreciation accounting. It defines depreciation and related terms like depletion, amortization, and obsolescence. It discusses the causes and objectives of charging depreciation. The document also explains factors affecting depreciation amounts and relevant accounting principles. Finally, it describes the straight line and written down value methods for allocating depreciation over the useful life of an asset.
The document discusses product life cycle costing (PLCC). PLCC tracks and accumulates all costs from invention to abandonment of a product. It helps calculate total costs over the product's entire lifecycle. PLCC considers initial costs, operating and maintenance costs, and can identify areas for cost reduction. PLCC was developed in the 1960s and used by defense agencies to improve cost effectiveness. It provides a more accurate assessment of total revenues and costs than traditional accounting methods.
The document discusses inventory valuation and different methods used for valuing inventories. It defines inventories as assets held for sale, in production for sale, or materials/supplies used in production or rendering services. Inventories arise due to time lags in purchase and sale or processing. They must be valued at the lower of cost or net realizable value. Cost includes all purchase, conversion and other costs to bring inventory to its present condition/location excluding abnormal costs. Common costing methods are FIFO, LIFO and weighted average.
This document discusses cost control and cost reduction in managerial economics. It defines cost control as monitoring and regulating expenditure, and involves setting targets, measuring actual performance, analyzing variances, and taking corrective action. Cost reduction aims to eliminate unnecessary costs to improve profitability. Key aspects of cost control include planning, communication, motivation, appraisal, and decision-making. Common cost control techniques are budgetary control, standard costing, inventory control, ratio analysis, and variance analysis.
A presentation on Property, Plant & Equipment (PPE)-IAS 16, Prepared by a few students of Dept. of Accounting & Info. Systems, Jahangirnagar University, Savar, Dhaka
This document summarizes International Accounting Standard 2 (IAS 2) which provides guidance on accounting for inventories. The key points are:
1) IAS 2 defines inventory as assets held for sale, in production, or in the form of materials used in production. It establishes cost as the default basis for valuing inventories.
2) Cost is determined using purchase costs, conversion costs, and other costs to bring inventory to its present condition and location. Net realizable value provides the floor for the valuation of inventory.
3) IAS 2 allows different cost flow assumptions - FIFO, LIFO, weighted average - and requires specific disclosures about inventory amounts, costs, and accounting policies.
This document provides an overview of IAS 16, which establishes the accounting requirements for property, plant and equipment. It defines key terms, outlines the requirements for recognition, measurement, depreciation, impairment, derecognition and disclosure of property, plant and equipment. The standard aims to prescribe the accounting treatment for PPE, including how to determine the carrying amount and calculate depreciation charges and impairment losses. It applies to tangible items used in operations or for administrative purposes that are expected to be used for more than one period.
The document discusses IAS 2, which provides guidance on accounting for inventories. It defines inventories as assets held for sale, in production, or in the form of materials or supplies. The cost of inventories includes purchase costs, conversion costs, and other costs to bring them to their present location and condition. Inventories must be measured at the lower of cost or net realizable value.
The document discusses activity-based costing (ABC). It provides an example of calculating activity rates for a purchase invoice processing activity. It shows calculating the activity usage and unused activity amounts as well as the total cost of resources supplied broken into usage and unused amounts. The document also provides an example comparing traditional overhead allocation and ABC for two products. ABC results in more accurate product costs than traditional methods.
CONSTRUCTION PERFORMANCE MANAGEMENT SLIDESHIRE.pptxabateniguse
The document provides an overview of resource management topics for construction performance and optimization, including:
1) Financial management which involves planning, acquiring, and utilizing funds efficiently. It also discusses the goals and functions of financial management.
2) Human resource management which involves recruitment, selection, employment legislation, discipline, development, training, and rewarding systems to manage workers.
3) Physical and information resource management, including construction materials management, construction equipment management, and the use of project information and management systems.
Transfer pricing refers to the prices charged for goods and services transferred between divisions within the same company. There are several approaches to setting transfer prices, including using market prices, cost-based prices, negotiated prices, or administered prices set by a rule. The objectives of transfer pricing are to provide accurate performance measurement for each division, encourage goal congruence between divisions, and mimic external market prices. Key considerations include using transfer prices that motivate optimal sourcing and production decisions for the entire company.
This document discusses Accounting Standard AS-2 regarding the valuation of inventories. It outlines the objectives of accounting standards and AS-2, which are to standardize the computation of inventory costs and the valuation of closing stock. The standard applies to inventories held for sale, in production, or as materials/supplies. Inventories must be valued at the lower of cost or net realizable value. Cost includes purchase costs, conversion costs, and other costs to bring inventory to its present condition/location. Net realizable value is estimated selling price less completion/selling costs. Common costing methods like FIFO, LIFO, and weighted average are also described.
The document discusses standard costing, which involves setting standards for costs and revenues for controlling costs through variance analysis. It describes establishing standards for different cost elements like direct materials, direct labor, and overheads. Variances between actual and standard costs are analyzed to identify causes. Variance analysis helps reduce costs, measure efficiency, and control prices. The document outlines the standard costing process and advantages like effective cost control and developing cost consciousness.
This document discusses depreciation, including its concept, objectives, causes, and methods. It defines depreciation as the permanent fall in value of fixed assets due to wear and tear from use in business. The objectives of depreciation include calculating proper profits, maintaining the original investment, and providing for asset replacement. Causes include wear and tear, obsolescence, and the passage of time. Common depreciation methods discussed are the straight-line method, declining balance method, and sum of years digits method.
This document provides tips and advice for students on developing effective study skills, independent learning habits, managing their time, prioritizing tasks, preparing for exams, and dealing with exam stress. Some key points covered include creating a study timetable, focusing study sessions on understanding material rather than just reading, practicing exam techniques like reading instructions carefully, and maintaining a healthy lifestyle during revision periods.
The document defines depreciation as allocating an asset's depreciable amount over its estimated life. Depreciation aims to match revenues and expenses to determine profit and spread an asset's cost over the periods it benefits the company. Depreciable assets are used for more than one period, have a finite life, and are held for business use. Non-depreciable assets include land and some investment property. Methods of depreciation include straight-line, units-of-production, and declining balance, with each calculating depreciation expense differently over the asset's estimated useful life.
A customer-centric costing system that bases all cost workings for a product from its market price. The purpose is to reduce cost of a product as low as possible to arrive at a price that would be either equal to or less than that of competitors’ product while delivering the same functionality.
This document defines depreciation as the reduction in the value of an asset due to wear and tear, usage, or obsolescence over time. It discusses the allocation of an asset's cost over its useful life, with depreciation being a non-cash expense. Various methods of calculating depreciation are presented, along with factors that determine the depreciation amount such as the asset's cost, useful life, and salvage value. The document also notes disclosure requirements for depreciation in financial statements and regulations around changing depreciation methods.
This document discusses the valuation and accounting of inventory. It defines inventory as assets held for sale, in production, or as supplies. Inventory should be valued at the lower of cost or net realizable value. Cost includes all purchase costs, conversion costs like direct labor and allocated overheads, and other costs to bring inventory to its present condition. Common costing methods are specific identification, FIFO, and weighted average. Disclosures include accounting policies and total inventory carrying amounts.
Depreciation is the gradual decrease in the economic value of capital assets over time due to wear and tear or obsolescence. It is a cost allocation process that matches the cost of operational assets with the periods benefited from their use. There are several methods for calculating depreciation for accounting and tax purposes, including straight-line, sum-of-the-years digits, and sinking fund methods. Tax systems also have specific rules around capital allowances, tax lives of assets, additional first-year depreciation deductions, and real property depreciation.
The document defines depreciation as the allocation of the depreciable amount of an asset over its estimated useful life. The objectives of depreciation are to match expenses with revenues and allocate the cost of an asset over the periods it benefits the company. Assets are depreciable if they are used for more than one accounting period and have a finite useful life. Common depreciation methods include straight-line, reducing balance, and production output. Capital expenditures extend the life or increase the value of an asset while revenue expenditures are consumed within an accounting period.
1) Intangible assets are non-physical assets that provide long-term benefits to a company such as patents, copyrights, and goodwill.
2) The costs of intangible assets are capitalized and amortized over the shorter of their legal or economic useful life. Amortization expense is recorded systematically over time.
3) Examples of intangible assets include patents, copyrights, trademarks, goodwill, franchises, and research and development costs. The accounting treatment depends on whether the asset was internally generated or purchased.
This document provides an overview of depreciation accounting. It defines depreciation and related terms like depletion, amortization, and obsolescence. It discusses the causes and objectives of charging depreciation. The document also explains factors affecting depreciation amounts and relevant accounting principles. Finally, it describes the straight line and written down value methods for allocating depreciation over the useful life of an asset.
The document discusses product life cycle costing (PLCC). PLCC tracks and accumulates all costs from invention to abandonment of a product. It helps calculate total costs over the product's entire lifecycle. PLCC considers initial costs, operating and maintenance costs, and can identify areas for cost reduction. PLCC was developed in the 1960s and used by defense agencies to improve cost effectiveness. It provides a more accurate assessment of total revenues and costs than traditional accounting methods.
The document discusses inventory valuation and different methods used for valuing inventories. It defines inventories as assets held for sale, in production for sale, or materials/supplies used in production or rendering services. Inventories arise due to time lags in purchase and sale or processing. They must be valued at the lower of cost or net realizable value. Cost includes all purchase, conversion and other costs to bring inventory to its present condition/location excluding abnormal costs. Common costing methods are FIFO, LIFO and weighted average.
This document discusses cost control and cost reduction in managerial economics. It defines cost control as monitoring and regulating expenditure, and involves setting targets, measuring actual performance, analyzing variances, and taking corrective action. Cost reduction aims to eliminate unnecessary costs to improve profitability. Key aspects of cost control include planning, communication, motivation, appraisal, and decision-making. Common cost control techniques are budgetary control, standard costing, inventory control, ratio analysis, and variance analysis.
A presentation on Property, Plant & Equipment (PPE)-IAS 16, Prepared by a few students of Dept. of Accounting & Info. Systems, Jahangirnagar University, Savar, Dhaka
This document summarizes International Accounting Standard 2 (IAS 2) which provides guidance on accounting for inventories. The key points are:
1) IAS 2 defines inventory as assets held for sale, in production, or in the form of materials used in production. It establishes cost as the default basis for valuing inventories.
2) Cost is determined using purchase costs, conversion costs, and other costs to bring inventory to its present condition and location. Net realizable value provides the floor for the valuation of inventory.
3) IAS 2 allows different cost flow assumptions - FIFO, LIFO, weighted average - and requires specific disclosures about inventory amounts, costs, and accounting policies.
This document provides an overview of IAS 16, which establishes the accounting requirements for property, plant and equipment. It defines key terms, outlines the requirements for recognition, measurement, depreciation, impairment, derecognition and disclosure of property, plant and equipment. The standard aims to prescribe the accounting treatment for PPE, including how to determine the carrying amount and calculate depreciation charges and impairment losses. It applies to tangible items used in operations or for administrative purposes that are expected to be used for more than one period.
The document discusses IAS 2, which provides guidance on accounting for inventories. It defines inventories as assets held for sale, in production, or in the form of materials or supplies. The cost of inventories includes purchase costs, conversion costs, and other costs to bring them to their present location and condition. Inventories must be measured at the lower of cost or net realizable value.
The document discusses activity-based costing (ABC). It provides an example of calculating activity rates for a purchase invoice processing activity. It shows calculating the activity usage and unused activity amounts as well as the total cost of resources supplied broken into usage and unused amounts. The document also provides an example comparing traditional overhead allocation and ABC for two products. ABC results in more accurate product costs than traditional methods.
CONSTRUCTION PERFORMANCE MANAGEMENT SLIDESHIRE.pptxabateniguse
The document provides an overview of resource management topics for construction performance and optimization, including:
1) Financial management which involves planning, acquiring, and utilizing funds efficiently. It also discusses the goals and functions of financial management.
2) Human resource management which involves recruitment, selection, employment legislation, discipline, development, training, and rewarding systems to manage workers.
3) Physical and information resource management, including construction materials management, construction equipment management, and the use of project information and management systems.
Transfer pricing refers to the prices charged for goods and services transferred between divisions within the same company. There are several approaches to setting transfer prices, including using market prices, cost-based prices, negotiated prices, or administered prices set by a rule. The objectives of transfer pricing are to provide accurate performance measurement for each division, encourage goal congruence between divisions, and mimic external market prices. Key considerations include using transfer prices that motivate optimal sourcing and production decisions for the entire company.
This document discusses Accounting Standard AS-2 regarding the valuation of inventories. It outlines the objectives of accounting standards and AS-2, which are to standardize the computation of inventory costs and the valuation of closing stock. The standard applies to inventories held for sale, in production, or as materials/supplies. Inventories must be valued at the lower of cost or net realizable value. Cost includes purchase costs, conversion costs, and other costs to bring inventory to its present condition/location. Net realizable value is estimated selling price less completion/selling costs. Common costing methods like FIFO, LIFO, and weighted average are also described.
The document discusses standard costing, which involves setting standards for costs and revenues for controlling costs through variance analysis. It describes establishing standards for different cost elements like direct materials, direct labor, and overheads. Variances between actual and standard costs are analyzed to identify causes. Variance analysis helps reduce costs, measure efficiency, and control prices. The document outlines the standard costing process and advantages like effective cost control and developing cost consciousness.
This document discusses depreciation, including its concept, objectives, causes, and methods. It defines depreciation as the permanent fall in value of fixed assets due to wear and tear from use in business. The objectives of depreciation include calculating proper profits, maintaining the original investment, and providing for asset replacement. Causes include wear and tear, obsolescence, and the passage of time. Common depreciation methods discussed are the straight-line method, declining balance method, and sum of years digits method.
This document provides tips and advice for students on developing effective study skills, independent learning habits, managing their time, prioritizing tasks, preparing for exams, and dealing with exam stress. Some key points covered include creating a study timetable, focusing study sessions on understanding material rather than just reading, practicing exam techniques like reading instructions carefully, and maintaining a healthy lifestyle during revision periods.
This document discusses accounting for intangible assets and brands. It defines intangible assets and notes their importance, comprising 80% of company value on average. Common intangible assets include patents, copyrights, franchises, trademarks and goodwill. Intangible assets must be identified, costs measured and collected, amortized over their useful life, and reflected on financial statements. Brands are also considered intangible strategic assets that create goodwill and market share. Brand accounting requires collection and allocation of brand creation costs, valuation of the brand, and amortization of brand costs on financial statements. Valuation methods for brands include cost, market and income approaches.
The document outlines a lesson plan that discusses the global context of business, including the major world marketplaces, drivers of globalization, competitive advantages, trade balances, exchange rates, barriers to international trade, and factors to consider when deciding whether to engage in international business. Students are provided exercises to analyze different countries' economies and trade relationships.
Control accounts help locate errors and provide a summary of total debtor and creditor balances. They are prepared separately from the sales and purchases ledgers. Control accounts take the form of accounts, with debit totals from the ledger on the left and credit totals on the right. The sales ledger control account equals total debtors, and the purchases ledger control account equals total creditors. Minority balances can occur temporarily in the control accounts due to returns or claims after settlement. The self-balancing system treats control accounts as part of double entry, while the sectional balancing system treats debtors/creditors accounts as double entry and control accounts as memorandum.
This document provides an overview of depreciation accounting. It defines depreciation as the permanent decrease in the value of an asset due to factors like wear and tear, obsolescence, or the passage of time. The document outlines various causes of depreciation including wear and tear, exhaustion, effluxion of time, weather effects, and permanent declines in asset value. It also discusses objectives of recording depreciation such as correctly calculating profits, complying with legal requirements, and maintaining the integrity of capital. Finally, the document introduces different depreciation methods used in accounting like the straight-line method, declining balance method, and annuity method.
This document discusses depreciation, which refers to the reduction in value of fixed assets over time due to usage and age. It defines depreciation and lists assets that are depreciated, such as machinery, furniture, vehicles, and electronics used for business. The objectives and causes of depreciation are outlined. Several depreciation methods are presented, including the straight-line method and written down value method. Examples are provided to illustrate how to calculate depreciation using each method. The advantages and disadvantages of the straight-line and written down value methods are also summarized.
The document discusses key topics in international business, including the major drivers of globalization, major world marketplaces, competitive advantage, import/export balances, and exchange rates. It provides definitions for important terms and concepts. Several charts and graphs are included to illustrate trade relationships and deficits between countries.
Process of preparing effective business messagessyed ahmed
The document provides guidance on preparing effective business messages. It outlines 5 key planning steps: identifying your purpose and audience, choosing ideas, collecting supporting data, and organizing your message. It describes direct and indirect approaches and emphasizes strong beginnings and endings. It also reviews standard formats for business letters and memorandums, including appropriate structure, style, and punctuation conventions.
The document discusses the definition of land under Malaysian law and the English common law doctrine of fixtures. It provides examples of how determining what constitutes a fixture or a chattel is important for resolving disputes in property and loan transactions. The key tests from the 1872 English case Holland v. Hodgson are explained - the degree of annexation test and purpose of annexation test must both be considered. Two important Malaysian cases - Goh Chong Hin v. Consolidated Malay Rubber and Sungei Way Leasing v. Lian Seng Properties - applied these tests and established that the English law of fixtures applies in Malaysia, even when a retention of title clause exists.
Chapter 01 concepts and principles of insuranceiipmff2
The document defines insurance as a social device where individuals transfer risk to an insurer who pools losses to make statistical predictions and provide payments from premium contributions. Legally, it is a contract where an insurer provides security to an insured against specified events in exchange for a premium proportionate to the risk. Key elements are risk transfer from insured to insurer, insurance as a business to meet costs and make profit, and an insurance contract as a legally enforceable agreement. Fundamental principles include utmost good faith, indemnity, subrogation, contribution, and proximate cause. There are various types of insurance and governing laws regulate the insurance sector in India.
Marine Insurance is considered to be a tough nut to crack. This slide presentation would give the viewers some basic aspects of Marine Insurance. Suggestions and comments are welcome.
The document discusses key aspects of engineering insurance policies, including machinery breakdown insurance. Some key points:
1) Engineering insurance policies provide replacement value coverage and use an excess amount to determine rates and claims payments. Policies require reinstatement of the sum insured after a claim.
2) Claims can be settled on a partial or total loss basis, with depreciation applied differently depending on the type of loss.
3) Average clauses are used to determine proportionate liability when there is underinsurance. Claims require documentation of damage details, replacement values, depreciation, salvage, and excess amounts to determine payouts.
How to Prepare Effective Business Messages(Preparing effective business messa...Zakaria Ali
The document discusses the process of preparing effective business messages. It outlines 5 key planning steps: 1) identify your purpose, 2) analyze your audience, 3) choose your idea, 4) collect your data, and 5) organize your message. It also discusses opening and closing paragraphs, drafting, revising, and editing the message. The overall process emphasizes planning, organization, and ensuring the message is clear, concise, and accomplishes its purpose.
IAS 36 provides guidance on impairment of assets. An impairment loss occurs when an asset's carrying amount exceeds its recoverable amount. A cash generating unit is the smallest identifiable group of assets that generates cash inflows independently of other assets. Impairment losses are first allocated to goodwill associated with the CGU, then proportionately to other assets in the CGU based on their carrying amounts.
The document discusses key concepts related to accounting for property, plant and equipment (PPE) as per Indian Accounting Standard (IndAS) 16. It covers initial recognition of PPE at cost, components of cost, subsequent measurement using cost or revaluation model, depreciation methods, impairment and derecognition. It also includes examples on capitalization of borrowing costs, treatment of restoration costs, and practice questions related to accounting for PPE.
Plant Assets, Plant assets and equipment, land, land improvements, Building, depreciation, computing depreciation, depreciation methods, straight line, units of activity, depreciation and taxes, plant assets disposal, retirement of plant assets, gain on disposal, lost on disposal, jose cintron, advance business consulting, mba4help.com
Plant Assets, Plant assets and equipment, land, land improvements, Building, depreciation, computing depreciation, depreciation methods, straight line, units of activity, depreciation and taxes, plant assets disposal, retirement of plant assets, gain on disposal, lost on disposal, jose cintron, advance business consulting, jose cintron, MBA, mba4help.com, Plant Assets, Plant assets and equipment, land, land improvements, Building, depreciation, computing depreciation, depreciation methods, straight line, units of activity, depreciation and taxes, plant assets disposal, retirement of plant assets, gain on disposal, lost on disposal, jose cintron, advance business consulting, jose cintron, MBA, mba4help.com
Cash flow estimation ppt @ bec doms on financeBabasab Patil
The document discusses estimating cash flows for capital budgeting projects. It explains that cash flow estimation involves forecasting sales, costs, expenses, assets needed, depreciation, and taxes over time. The general process is the same for new projects, expansions, and replacements, but replacements typically require less estimation. Key steps are outlined for estimating cash flows for new ventures and replacements, including identifying incremental impacts and dealing with subjective estimates.
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The document discusses key concepts in financial accounting, including the accounting equation (Assets = Liabilities + Owners' Equity), balance sheets, and the basic elements they contain (assets, liabilities, owners' equity). It also covers revenues and expenses, how they impact owners' equity, and examples like sales of inventory that contain both revenue and expense elements. The document discusses various adjustments that may need to be made to accounting records like depreciation, interest, rent, and unearned revenue.
The document discusses key concepts in financial accounting, including the accounting equation of Assets = Liabilities + Owners' Equity. It explains that the balance sheet is an expanded expression of this equation. It also defines assets, liabilities, owners' equity, revenues and expenses, and how various transactions affect the accounting equation. Specific topics covered include historical cost, depreciation, interest, rent, sales of inventory, adjustments to accounts, and unearned revenue.
The document provides an overview of basic financial accounting concepts. It explains that accounting is based on the accounting equation of assets equaling liabilities plus owners' equity. Assets are valuable resources owned, while liabilities are obligations, and owners' equity is the residual interest in assets. Revenues increase owners' equity by providing goods/services, while expenses decrease it by consuming resources to generate revenue. Financial statements like the balance sheet present a company's assets, liabilities, and owners' equity at a point in time.
The document provides an overview of basic financial accounting concepts. It explains that accounting is based on the accounting equation of assets equaling liabilities plus owners' equity. Assets are valuable resources owned, while liabilities are obligations, and owners' equity is the residual interest in assets. Revenues increase owners' equity by providing goods/services, while expenses decrease it by consuming resources to generate revenue. Financial statements like the balance sheet present a company's assets, liabilities, and owners' equity at a point in time.
The document provides an overview of key concepts for financial managers regarding capital budgeting. It discusses:
1) The goals of financial managers to maximize shareholder value by selecting projects with positive net present value (NPV). NPV measures the incremental cash flows of projects discounted at the cost of capital.
2) The distinction between accounting profits and cash flows that are relevant for capital budgeting. Cash flows consider the timing of cash inflows and outflows while accounting adjusts for accruals.
3) The concept of incremental cash flows which are the difference in cash flows from undertaking a project versus not undertaking it. Only incremental cash flows are considered in the analysis.
4) A detailed example is
The document discusses the preparation of final accounts, which provide key financial information about a business. It describes the objectives and components of final accounts, including the trading account, profit and loss account, balance sheet, and manufacturing account. It outlines the items and format of each account, and explains the importance and purpose of preparing a worksheet to help prevent errors in compiling the final accounts from the trial balance.
The document discusses basic concepts of financial accounting including the accounting equation, balance sheets, and key elements like assets, liabilities, owners' equity, revenues, and expenses. It explains that the accounting equation must always balance, with assets equal to liabilities plus owners' equity. Transactions can increase or decrease different elements of the balance sheet to maintain the balance of the equation. Historical costs, revenues, expenses, adjustments, and other accounting concepts are also summarized.
This document discusses capital and revenue expenditures. Capital expenditures are incurred to acquire or improve assets used in business operations. Examples include purchasing machinery. Revenue expenditures are incurred to maintain assets and operate the business, like repairs and salaries. Deferred revenue expenditures provide benefits over multiple years, like research costs. Expenses must be classified correctly for financial reporting purposes like adhering to the matching principle and providing a true and fair view of financial performance.
This document provides an overview of basic financial accounting concepts, including the accounting equation, balance sheets, assets, liabilities, owners' equity, revenues, expenses, transactions, historical cost, adjustments, interest, rent, depreciation, and unearned revenue. It explains that the accounting equation must always balance, assets represent resources owned, liabilities are obligations, and owners' equity is the residual claim on assets. Revenues increase owners' equity while expenses decrease it.
The document provides an overview of basic financial accounting concepts. It explains that accounting is based on the accounting equation of Assets = Liabilities + Owners' Equity. The balance sheet expresses this equation by listing assets, liabilities, and owners' equity. It also defines key elements like assets, liabilities, owners' equity, revenues and expenses. Transactions must follow the accounting equation and be recorded and analyzed to maintain accurate financial records.
The document discusses the preparation of final accounts, which provide information on the profit/loss and financial position of a business. It describes the objectives and components of final accounts, including trading account, profit and loss account, and balance sheet. It explains the purpose of each account, the key items included on their debit and credit sides, and their importance. It also covers topics like adjustment entries, manufacturing account, and the use of a worksheet to prepare adjusted trial balance for the final accounts.
The document discusses final accounts and their importance in accounting. It explains that final accounts like trading account, profit and loss account, and balance sheet are prepared from the trial balance and provide key financial information. The trading account shows gross profit or loss, while the profit and loss account provides net profit or loss. The balance sheet presents the assets and liabilities of the business at a point in time. Adjustment entries and the worksheet help ensure accurate preparation of final accounts.
Financial accounting mgt101 power point slides lecture 20Abdul Wadood Ansary
This document provides an overview of capital work in progress, revaluation of fixed assets, and accounting for the disposal of fixed assets when depreciation is charged on the basis of use. It discusses journal entries for capital work in progress, how to account for disposal of assets, and the rules and accounting treatment for revaluing fixed assets. The document also includes an example to illustrate calculating depreciation and the written down value of a disposed asset when depreciation is charged based on use of the asset.
The document provides a list of important topics for DBF/JAIIB exam preparation in November 2017. It includes topics such as the rule of 72 and 69, trial balance, types of errors, ratio analysis, capital and revenue expenditures, GAAP, accounting concepts and conventions, accounting standards, bank reconciliation statement, depreciation methods, share capital classifications, and various accounting terminologies. It also provides links to online resources for further reading on these topics on the website www.AccountsClass.com.
Similar to Plant & equipment depreciation and intangible assets (20)
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DEPRECIATION
• Allocating the cost of plant & equipment over the ear of
use
• Allocation of the cost of the tangible plant asset to
expense in the periods in which services are received
from the asset
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MATCHING PRINCIPLE
Offset the revenue of an accounting period with
the cost of services being consumed
5. BALANCESHEET
INCOME STATMENT
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RELATIONHIP BETWEEN
DEPRECIATION & MATCHING PRINCIPE
REVENUE
EXPENCE
DEPRECIATION
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Depreciation is not a process of
valuation but a process of cost
allocation
• BOOK VALUE:
COST – RELATED ACCUMULATED DEPRCIATION
• CAUSES OF DEPRECIATION
• Physical deterioration
• obsolescence
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Plant & Equipments
• The term plant and equipment is used to describe long-lived
assets acquired for use in the operation of the
business and not intended for resale to customers
• The term Fixed Assets has long been used in accounting
literature to describe , all types of plant and equipment.
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Major Categories of
Plant & Equipment
1. Tangible Assets:
These are physical substances such as land,
building or a machine. These are further
classified into two sub-classes:
a) Plant property: Subject to depreciation
b) Land: Not subject to depreciation
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2. Intangible Assets:
They are non-physical and non-current.
3. Natural Resources:
Site acquired for the purpose of extraction or removing
some valuable resources such as oil, minerals, or
timber is classified as natural resource.
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Determining the Cost of
Plant & Equipment
• Cost is easily determined when an asset is purchased
for cash.
• Purchased on installment plan.
• Recorded as interest expense
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Land
• Expenditures such as commissions, legal
fees etc, also become part of the cost of
land.
15. Apportionment of a Lump-Sum
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Purchase
• Separate ledger accounts are necessary for land and
building.
• Land is non-depreciable asset But building is.
• The purchase price must be apportioned between land
and building.
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Apportioning cost between
Land & Building
Particulars Value per
Appraisal
Percentage of
Total
Apportionment
of Cost
Land $200,000 40% $160,000
Building $300,000 60% $240,000
Total $500,000 100% $400,000
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Land Improvements
• They should be recorded in a separate
account entitled “Land Improvements”
• Such as fences, parking lots etc.
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Buildings
• Repairs made under these circumstances are
charged to the building account.
• Such as ordinary repairs are considered as
maintenance expenses.
19. Capital Expenditures & Revenue
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Expenditures
• Expenditures for the purchase or expansion of plant
assets are called capital expenditures and are recorded
in asset account.
• Expenditures for ordinary repairs maintenance, fuel and
other items necessary to the ownership and use of plant
and equipment are called revenue expenditures and are
recorded by debiting expense accounts.
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Capital Budgeting
• The process of planning and evaluating proposals for
capital expenditures is called capital budgeting.
• It includes decisions such as whether to build a new
factory or renovate the old ones. Etc.
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Capital Expenditure
Budget
• Cash budget are forecasts of expected cash
receipts and cash payments for the coming year.
• Capital expenditure budget forecasts the
company’s capital expenditures over a period of
several years.
23. Management’s Responsibility for
Depreciation Methods & Related
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Estimates
• Principal of Consistency:
A company should not change from year to year the
method used in computing the depreciation expense.
• Financial Statement Disclosures:
A company should disclose in notes to its financial
statements the methods used to depreciate plant assets.
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Continued..
• Estimates of Useful Life & Residual Value:
Estimating the useful lives and residual values
of plant assets also is a responsibility of
management.
• Revision of Estimated Useful Lives:
A revised estimate of useful life should be made
and the periodic depreciation expense
decreased or increased accordingly
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Inflation and Depreciation
• Inflation: It is the persistent increase in
prices of goods and services.
• Depreciation: Gradual decrease in the
value of fixed asset.
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Disposal of Plant And
Equipment
Case 1: When Asset is Fully Depreciated.
Assume that office equipment purchased 10 years ago
at a cost of 20,000 has been fully depreciate and is no
longer useful . The entry to record is as follows:
Accumulated Depreciation: Office Equipment……...20,000
Office Equipment………………….…………. 20,000
• To remove from the accounts the cost and the
accumulated depreciation on fully depreciated office
equipment now being scrape.
27. Gains & Losses on Disposals of
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Plant & Equipment
• When plant assets are sold, an gain or loss on
the disposal is computed by comparing the
book value with the amount received from the
sale.
• A sales price in excess of the book value
produces a gain.
• A sales price below the book value produces
a loss.
• These gains or losses; if material in amount,
should be shown separately in the income
statement in computing the income from
operations.
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Case 2
• Disposal at a Price Above Book Value: (Gain on disposal
of plant asset)
Assume that a machine which cost $10,000 and has a book
value of $2,000 is sold for $3,000. The journal entry to record
this Is as follows:
Cash………………………………………………………. 3,000
Accumulated Depreciation: Machinery……………….. 8,000
Machinery………………………………………… 10,000
Gain on Disposal of Plant Assets………………. 1,000
To record sale of machinery at a price above book value.
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Case 3
• Disposal at a Price Below Book Value: (Loss on disposal of
plant asset)
Now assume that the same machine is sold for $500. The journal
entry for this is as follows:
Cash…………………………………………………… 500
Accumulated Depreciation: Machinery……………. 3,000
Loss on Disposal of Plant Assets………………….. 1,500
Machinery…………………………………. 10,000
• To record sale of machinery at a price below book value
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Trading in Used Assets
on New
Assume that Rancho Landscape has an old pickup truck which
originally cost $10,000 but which now has a book value of $2,000.
Rancho trades in this old truck on a new one with a fair market
value of $15,000. The truck dealership grants Rancho a “trade-in
allowance” of $3500 for the old truck, and Rancho pays the
remaining $11,500 cost of the new truck in cash. Transaction is as
follows:
Vehicles (new truck)…………………………………………. 15,000
Accumulated Depreciation: Truck (old truck)……………… 8,000
Vehicles (old truck)…………………………………………..... 10,000
Gain on Disposal of Plant Assets……………………………. 1,500
Cash……………………………………….……………………. 11,500
Traded-in old truck on a new one costing $15,000. Received $3,500
trade-in allowance on the old truck, which had a book value of $2,000
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Intangible Assets
Definition:
Intangible assets are
assets which are used in
the operation of the
business but which have
no physical substance and
are non-current.
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Operating Expenses v/s Intangible
Assets
Operating expenses are the expenses not
directly connected in production of income,
such as salary & wages, rent, utilities, office
supplies and alike.
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Amortization
• This term is used to describe the systematic write-off to
expense of the cost of an intangible asset over its useful
life.
• The usual accounting entry of a debit to amortization
expense and a credit to the intangible asset account.
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Goodwill
• It is the present value of future earning in
excess of the normal return on net
identifiable assets.
• Goodwill itself is not an
identifiable asset.
• The extra amount that a buyer
would pay to purchase a product
represents the value the business’s
goodwill.
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Estimating Goodwill
• Goodwill estimation is in large part a
matter of personal opinion.
Methods of estimating goodwill:-
1. Through negotiation between
buyer and seller.
2. Determined as multiple of the
amount by which average annual
earnings exceed normal earnings.
3. Capitalizing the amount by which
average earnings exceed normal
earnings.
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Recording Goodwill in
Accounting Records
• Recorded only when it is purchased.
• Debited to an asset account entitled Goodwill.
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Patents
• A patent is an exclusive right granted by
the federal government for
manufacture, use, and sale of a
particular product.
• Are recorded by debiting the intangible
asset account Patents.
• Patents are granted for a period of 17
years.
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Trademarks & Trade
Names
• A trademark is a word, symbol, or
design the identifies a product or a
group of products.
• A permanent exclusive right to the
use of a trademark, brand name, or
commercial symbol may be
obtained by registering with federal
government.
• Should be treated as a expense
when incurred.
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Franchises
• A franchise is a right granted by a
company or a governmental unit to
conduct a certain type of business in a
specific geographical area.
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Copyrights
• A copyright is an exclusive right
granted by federal government to
protect the production and sale of
literary or artistic materials for the life
of the creator plus 50-years.
• Are Expenses when paid.
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Research &
Development Cost
• Some companies treat all research and
development costs as expense in the year
incurred.
• Other companies in the same industry
recorded these costs as intangible assets to
be amortized over future years.
• All R&D expenditure should be charged to
expense when incurred.
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Natural Resources
• Natural resources don’t depreciate but
are gradually depleted as they are used.
• Accumulated depletion is a contra-asset
account similar to the accumulated
Depreciation account.
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Depreciation of Buildings &
Equipment Closely Related to
Natural Resources
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Depreciation, Amortization
and Depletion All have Common
Goal
• That is to allocate the acquisition cost of a
long-lived asset to expense over the years
in which the asset contribute to revenue
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Impairment of Long Lived
Assets
• If the cost of the asset cannot be
recovered through future use or sale the
asset should be written down to its net
realizable value.
• The offsetting debit is to a loss account
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Methods of Computing
Depreciation
• Straight Line
• Declining Method
• Double Declining Method
• Sum of Year Digit
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Straight Line Method
Cost – Residual Value
Depreciation Years of Useful Life
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Problem 10B-3
Cost of equipment = 80000
Useful life = 4 years
Residual value = 5000
Condition : Depreciation is charged until the equipment becomes fully
depreciated
(A)
Straight line method = cost – residual value
useful life
= 80000 – 5000
4
= 18750 (4/12)
= 6250 (depreciation for 1st year)
= 18750 (depreciation 2nd,3rd,4th year)
= 12500 (depreciation for 5th year) until the
equipment becomes fully depreciated
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Sum of Year Digit Method
To illustrate , consider our example of the
delivery truck with a 5-year life. Sum of years is :
1+2+3+4+5 = 15
Year Computation Depreciation
Expense
1st $15,000 x 5/15 $ 5,000
2nd $15,000 x 4/15 $4,000
3rd $15,000 x 3/15 $3,000
4th $15,000 x 2/15 $2,000
Total $15,000
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Problem 10B-3
• (B)
• Sum of the year digits method (Half year convention)
• Total sum of years = 1+2+3+4 = 10
• Cost – residual value = 80000 – 5000 = 75000
Year Computation Depreciation
Expense
Accumulated
Depreciation
1st 75000*4/10*6/12 15000 15000
2nd 75000*3/10 22500 37500
3rd 75000*2/10 15000 52500
4th 75000*1/10 22500 75000
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UNIT OF OUTPUT
Depreciation per
Unit Output
Cost – Residual Value
Estimated Units of Output