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Depreciation
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DEPRECIATION OF TANGIBLE NON CURRENT ASSET
DEPRECIATION OF TANGIBLE NON CURRENT ASSETCAUSES OF DEPRECIATIONWear and TearErosion, Rot, Rust and DecayObsolescenceInadequacyTimeDepletionMETHODS OF CALCULATING DEPRECIATION CHARGESSTRAIGT LINE METHOD REDUCING BALANCE METHODSTRAIGHT LINE METHODExample:If a van was bought for RM 22,000 and we thought we would keep it for four year and then sell it for RM 2,000 the depreciation to be charged each year would be;Cost (22,000)-estimated disposal value (2,000Number of expected year (4)= RM 5,000
REDUCING BALANCE METHODExampleIf a machine is bought RM10,000 and depreciation is to be charged at 20 per cent and the calculation for the first three year would be
RMCOST10,000FIRST YEAR DEPRECIATION(2,000)8,000SECOND YEAR DEPRECIATION(1,600)6,400THIRD YEAR DEPRECIATION(1,280)COST NOT YET APPORTIONED5,120