Grasp the Concept of Depreciation Accounting with Myhomeworkhelp.Com
Problem understanding the methods of depreciation accounting? Depreciation accounting can be particularly tricky. It forms an important part of accounting as it mainly deals with cost allocation. The main issue that students have with depreciation accounting is the fact that they are unable solves problems on it. Due to the existence of various methods, students are unable to identify which ones to use when and how. This hinders their learnings and refrains them from finishing off their assignments.
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What is depreciation?
Depreciation is the reduction in the value of goods for a period of time due to various factors. These factors may include usage, abuse or wear and tear. It is a method of cost allocation that is related to the period of time estimated during which the product will earn revenue for the company. Anything that loses its usage value over time can be depreciated except for land. With depreciation accounting and policy assignment help, the term can be further explored.
What are things required to calculate depreciation?
There are primarily three things required to calculate depreciation value. These include:
- The numbers of the year during which the product will be used for and is known as effective life.
- Salvage value that includes the selling amount of the asset after the effective life is surpassed.
- The cost of the asset which includes cost of installation, taxes, etc.
What are the methods of calculating depreciation?
As per depreciation accounting and policy assignment help, there are three methods of calculating the value of depreciation. These are:
- Straight-line depreciation method which involves the simple allocation of an even rate of depreciation per year over the effective life of the asset. It is given by formula:
Depreciation expense=(asset cost- residual value)/effective life
- Unit of production depreciation method where the cost per unit of production is determined then multiplied by the cost per unit with the total number of units the company produced.
Depreciation expense= (total acquisition cost- salvage value)/estimated total units
- Double declining method where the expense is counted It is given by:
Depreciation expense=2X straight-line depreciation value X book value at the beginning of the year
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