DEPRECIATION OF FIXED ASSETS.

FINANCIAL ACCOUNTING SSS2 FIRST TERM        

WEEK 7 &8

DEPRECIATION OF FIXED ASSETS

Performance Objectives

Students should be able to:

Explain the following methods of depreciation:

(a)  reducing balance method  (b) sum of the year's digit

2.       Write short notes on the following:

(a)  Depreciation      (b) Salvage value     (c) Obsolescence

Contents

REDUCING BALANCE METHOD (or DIMINISHING BALANCE METHOD)

Under this method, a fixed percentage is written off the reducing (or diminishing) balance of the asset yearly.

This method charges higher depreciation in the early years of the asset and lower in the later   years

The depreciation rate (%) to be applied is computed using the formula below:

S   

        Depreciation rate (%)   =    1   -       C

where:

n =    No. of …