DEPRECIATION OF FIXED ASSETS..

FINANCIAL ACCOUNTING SSS2 FIRST TERM               

WEEK 9

DEPRECIATION OF FIXED ASSETS

Contents

ACCOUNTING TREATMENT OF DEPRECIATION

There are two ways of treating depreciation in the ledgers. These are the Old Method and the Modern Method. However, the Modern Method which is preferred by accountants will be considered.

MODERN METHOD

An asset account is opened and a separate provision for a depreciation account is also opened. The depreciation for each year is debited to the Profit and Loss Account and credited to the Provision for Depreciation Account

Therefore the following accounts should be prepared:

1. Asset account ( e.g. Machinery Account)
2. Provision for Depreciation Account
3. Profit and Loss Account
4. Balance Sheet

Illustration

A machine cost N100,000. It is expected to have a…