Let’s go over Depreciation

before the test on

Depreciation

• The cost of the non current asset less how much we think we will sell it ÷ how long we will have it.

Cost less Sale ValueUseful life

Restoration Doors purchased a new photocopier $6000 to be sold for $300 in 4 year

Cost less Sales valueUseful life

6000 – 3004

= $1425 Depreciation Expense per year

Reporting Depreciation ExpenseRestoration Doors

Income Statement

For the month ending 30 May 2012

Revenue

Cash Sales 9000

Less Expenses

Wages 1000

Other Expenses 5000

Depreciation Expense 1425 7425

Profit 575

Accumulated Depreciation

• Every year that a business owns a Non Current Asset, the Depreciation Expense is added together (or Accumulated).

• This is to estimate how much the Non Current Asset has worn out over its useful life.

Reporting Accumulated DepreciationRestoration Doors

Balance Sheet (extract)

As at 30th May 2012

Non Current Assets

Photocopier 6000

Less Accumulated Depreciation 1425 4575

Reporting Accumulated Depreciation after 2 years

Restoration Doors

Balance Sheet (extract)

As at 30th May 2013

Non Current Assets

Photocopier 6000

Less Accumulated Depreciation 2850 3150

Reporting Accumulated Depreciation after 3 years

Restoration Doors

Balance Sheet (extract)

As at 30th May 2014

Non Current Assets

Photocopier 6000

Less Accumulated Depreciation 4275 1725

Calculating Accumulated Depreciation

Year Depreciation Expense

Accumulated Depreciation

1 1425 14252 1425 28503 1425 4275

Make sure you have completed

• All the Depreciation Exercises– Topline, CBD, P. Doyle

• Handed in the Dell Luggage Exercise (which is a photocopy and not on the computer).

• Completed your Depreciation Homework K. Harrison and handed it in.

• Have some notes to take home to study before you do the Depreciation Test.