1) Depreciation is the systematic allocation of the cost of a fixed asset over its useful life to match the cost with the economic benefits generated by the asset. 2) Without depreciation accounting, the entire cost of a fixed asset would be recognized in the year of purchase, providing a misleading view of an entity's profitability. 3) The straight-line method is the simplest way to calculate depreciation by subtracting salvage value from original cost and dividing by estimated useful life in years.

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

13. P20,000 / yr.

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/

32. TEH END.