BALANCE DAY ADJUSTMENTS:

DEPRECIATION

Learning Objectives

Introduction
Trial balance (TB) may not contain up to
date and complete financial statement data
TB only records expenses that have been
paid for the period and revenue that have
been received during the period
Therefore adjusting entries are required
every time financial statement are
prepared in order to ensure that revenues
are recorded in the period in which they are
earned, and expenses are recognized in the
period in which they are incurred.

Depreciation for Non

Current Assets

Assets which are expected to be

used more than one accounting
period
Have a limited useful life
Held by enterprise for use in the
running of business

Depreciation for
Non Current Assets

Causes Of
Depreciation

Back

Cost of Assets
CAPITAL
EXP

COST OF
ASSETS
REVENUE
EXP

Example

Method of
Depreciations

Straight Line Method

The amount of depreciation for each
accounting period will be the same

Annual depreciation
= Cost Scrap value
Estimated Useful life
or
= % x (Cost)

Reducing Balance Method

(RBM)

Final Presentation
Statement of Comprehensive Income
for the year ended..
RM
Less: Expenses
Depreciation expenses
xxx

Final
Presentation
Statement
of Comprehensive Income as at
Non-current Assets:
Cost
Machinery
Motor vehicles

xxx
xxx

Accumulated
depreciation
xxx
xxx

NBV
xxx
xxx

Consistency
Concept