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DEPRECIATION &
NON CURRENT ASSETS
CHAPTER 1
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Learning Objectives
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Non Current Assets
Assets which are expected to be used more than
one accountin period !a"e a #imited use$u# #i$e
!e#d b% enterprise $or use in the runnin o$business
Examp#es 'and and bui#dins( P#ant andmachiner%( )ixtures and
*ttins( and +otor"ehic#es
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Depreciation for NonCurrent Assets
Non,current assets are not chared to the incomestatement when
the% are purchased-
The% are retained in the statement o$ *nancia#position-
The cost o$ the asset( #ess an% residua# "a#ueestimated to exist
at the end o$ it.s use$u# #i$e( isre$erred to as the /depreciab#e
amount.-
This is chared to the income statement o"er theuse$u# #i$e o$
the asset-
This is re$erred to as depreciation. The purposeis to spread the
cost o$ the asset o"er its use$u##i$e-
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Depreciation forNon Current Assets
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Causes OfDepreciation
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Back
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Cost o$ Assets
COT O!AET
CAPITAL
EXP
REVENUE
EXP
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E"a#p$e
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+ethod o$
Depreciations
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Straiht 'ine +ethod
Annua# depreciation
0 Cost 1 Scrap "a#ue
Estimated Use$u# #i$e
or 0 2 x 3Cost4
The amount of depreciation for eachaccounting period wi !e the
same
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Reducin 5a#ance +ethod3R5+4
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Depreciation%E"erciseA "ehic#e costs R+67(777 and has a use$u#
#i$e o$ 8%ears- No residua# "a#ue- Reducin ba#ance is at872-
traig&t $ine
9:(777 a %ear is chared $or 8 %ears
Reducing ba$ance '()*+;ear < 67(777 x 872 0
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Depreciation%
E"erciseI$ the use$u# #i$e o$ an asset chanes this wi## a?ectthe
depreciation chared-Examp#eAn asset is purchased $or R+=7(777 with
a use$u# #i$eo$ @ %ears and no residua# "a#ue- It is
depreciated
on a straiht #ine basis-A$ter = %ears it is decided that the
asset wi## actua##%be producti"e $or another 8 %ears- Depreciation
$or%ears :, wi## be as $o##ows
R+Oriina# cost=7(777Depreciation %ears
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Disposa$ of Non
Current Assethen a non,current asset is disposed o$ ( both
theasset and the accumu#ated depreciation areremo"ed $rom the
re#e"ant #eder accounts andposted to a disposa# accountExamp#e
An asset was bouht $or R+68(777 and accumu#ateddepreciation is
R+
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!ina$ Presentation
Statement o$ Comprehensi"e Income$or the %ear ended--
R+'ess Expenses
Depreciation expenses xxx
'oss on disposa# xxxAdd other income
Pro*t on disposa# xxx
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!ina$Presentation"tate#ent of $inancia Po%ition a%
at&&&
Non'current A%%et%(
Co%t Accu#uated NBV
depreciation
)achiner* +++ +++ +++)otor ,ehice% +++ +++ +++
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Consistenc,
Concept
