Mr Hidayat is a sole trade who maintain his non-current asset at cost. On 31 December 2019, he owned the following non-current asset which had been depreciated on a yearly basis: Asset Cost (RM) Accumulated Depreciation (RM) Motor vehicles 260,000 70,000 Fixtures 74,000 37,200 During the year ended 31 December 2020, motor vehicles worth RM100,000 and fixtures worth RM13,000 were purchased. The motor vehicles were depreciated at 10 % per annum using the straight-line method and the fixtures at 20% per annum using the reducing balance method. Required: a) Motor vehicles account b) Fixtures account c) Accumulated depreciation accounts for each of the non-current assets for the ended 31 December 2020 d) Statement of Financial Position (extract) as at 31 December 2020
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Mr Hidayat is a sole trade who maintain his non-current asset at cost. On 31 December
2019, he owned the following non-current asset which had been
yearly basis:
Asset Cost (RM)
Motor vehicles 260,000 70,000
Fixtures 74,000 37,200
During the year ended 31 December 2020, motor vehicles worth RM100,000 and
fixtures worth RM13,000 were purchased.
The motor vehicles were depreciated at 10 % per annum using the straight-line
method and the fixtures at 20% per annum using the
Required:
a) Motor vehicles account
b) Fixtures account
c) Accumulated depreciation accounts for each of the non-current assets for the
ended 31 December 2020
d)
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