Non-current Assets
Depreciation & Disposal
One of the most heavily examined topics — questions cover calculating depreciation using straight-line and reducing balance methods, maintaining provision for depreciation accounts, and preparing disposal accounts when assets are sold or scrapped.
For disposal questions, always transfer both the asset cost AND the accumulated depreciation to the disposal account before recording the proceeds. Common mistake: only transferring the net book value. For reducing balance, always apply the percentage to the net book value, not the original cost.
Key Concepts to Revise
Straight-line Method
Equal depreciation each year. Formula: (Cost − Residual Value) ÷ Useful Life. Produces the same charge every year.
Reducing Balance Method
A fixed percentage applied to the net book value each year. Charge is higher in early years and reduces over time.
Provision for Depreciation
Accumulated depreciation account — credit entries each year. The asset account stays at cost; NBV = Cost − Provision.
Disposal Account
Transfer asset cost (Dr) and accumulated depreciation (Cr), then record proceeds. Profit or loss on disposal goes to income statement.
Past Paper Questions
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