Recording DEPRECIATION Grade 11 Accounting Module 2 Lesson

RECORDING DEPRECIATION Example : Fixed Installment & Diminishing balance Method A Arty, trading as

RECORDING DEPRECIATION: LEDGER GENERAL LEDGER VEHICLES Mar 01 Balance bd 150 000 EQUIPMENT Mar

RECORDING DEPRECIATION: LEDGER GENERAL LEDGER ACCUMULATED DEPRECIATION ON VEHICLES Mar 01 Balance bd 30

RECORDING DEPRECIATION JOURNAL GENERAL JOURNAL Debit Depreciation Credit 36 000 Accumulated depreciation on vehicles

RECORDING DEPRECIATION: LEDGER GENERAL LEDGER ACCUMULATED DEPRECIATION ON VEHICLES Feb 28 Balance cd 54

RECORDING DEPRECIATION ASSETS = OWNER’S EQUITY + LIABILITIES - R 24 000 0 -

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Recording DEPRECIATION Grade 11 Accounting Module 2 Lesson 3

RECORDING DEPRECIATION Example : Fixed Installment & Diminishing balance Method A Arty, trading as Arty’s Suppliers, started his business on 1 March 2008. On the first day (1 March 2009) of the second year of trading, Arty’s Suppliers will have the following balances in their General Ledger: Vehicles R 150 000 Equipment R 80 000 Accumulated depreciation on vehicles R 30 000 Accumulated depreciation on equipment R 12 000 On 28 February 2010, the end of the financial year, provision for depreciation must be made as follows: • vehicles at 20% p. a. according to the diminishing balance method • equipment at 15% p. a. according to the fixed instalment method

RECORDING DEPRECIATION: LEDGER GENERAL LEDGER VEHICLES Mar 01 Balance bd 150 000 EQUIPMENT Mar 01 Balance bd 80 000 DEPRECIATION

RECORDING DEPRECIATION: LEDGER GENERAL LEDGER ACCUMULATED DEPRECIATION ON VEHICLES Mar 01 Balance bd 30 000 bd 12 000 ACCUMULATED DEPRECIATION ON EQUIPMENT Mar 01 Balance

RECORDING DEPRECIATION JOURNAL GENERAL JOURNAL Debit Depreciation Credit 36 000 Accumulated depreciation on vehicles 24 000 Accumulated depreciation on equipment 12 000 Depreciation on vehicles: (R 150 000 – R 30 000) x 20% = R 24 000 Depreciation on equipment: R 80 000 x 15% = R 12 000

RECORDING DEPRECIATION: LEDGER GENERAL LEDGER VEHICLES Mar 01 Balance bd 150 000 EQUIPMENT Mar 01 Balance bd 80 000 DEPRECIATION Feb 28 Acc Dep on Vehicles GJ 24 000 Acc Dep on Equipment GJ 12 000

RECORDING DEPRECIATION: LEDGER GENERAL LEDGER ACCUMULATED DEPRECIATION ON VEHICLES Feb 28 Balance cd 54 000 Mar 01 Balance Feb 28 Depreciation bd 30 000 GJ 24 000 54 000 Mar 1 Balance bd 54 000 bd 12 000 GJ 12 000 ACCUMULATED DEPRECIATION ON EQUIPMENT Feb 28 Balance cd 24 000 Mar 01 Balance Feb 28 Depreciation 24 000 Mar 1 Balance bd 24 000

RECORDING DEPRECIATION ASSETS = OWNER’S EQUITY + LIABILITIES - R 24 000 0 - R 12 000 -R 12 000 0 • Depreciation is an imputed expense – thus OE decreases • Acc depreciation is a negative asset – thus assests decrease