DEPRECIATION AND DISPOSAL OF NON-

CURRENT ASSETS
Chapter 12
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 LEARNING OBJECTIVES

•Apply the reducing balance method formula to calculate the

depreciation expense for a given asset.

•Record the calculated depreciation expense in the appropriate

ledger accounts.
 Date:
Topic: Accounting or depreciation and disposal of
non-current assets
Lesson objective:
•Apply the reducing balance method formula to

STARTER ACTIVITY
calculate the depreciation expense for a given asset.
•Make appropriate ledger postings for the provision for
depreciation.

• How does reducing balance method of depreciation work?

The reducing balance method of depreciation is where the depreciation charged
each year decreases as it is calculated on the net book value rather than the cost

• State the two accounts and identify which account is debited

or credited?
N Transaction Debit Credit
o.

1. Kavita purchased fixtures costing

$25000, paid cheque

2. Kavita provided depreciation @ 40% per Let’s find out!

annum.
 Date:
Topic: Accounting or depreciation and disposal of

Task 1
non-current assets
Lesson objective:
•Apply the reducing balance method formula to
calculate the depreciation expense for a given asset.
•Make appropriate ledger postings for the provision for
depreciation.
Read Pg 159 and fill in the missing details
A) Each type of non-current asset has _____ ledger accounts.
5 min
1 ______________account
2___________________ account

B) The asset account always has a _______balance and the provision for depreciation
always has a _____ balance.

C) During the year – when asset is purchased

Asset a/c ______________
Cash a/c or Supplier’s a/c __________

D) At the year-end –
Income statement ______________
Provision for depreciation a/c _____________
Provision for depreciation a/c is balanced and Carried Down(c/d) __________ balance.
Asset account is balanced and Carried Down(c/d) as __________ balance.
 Date:
Topic: Accounting or depreciation and disposal of
non-current assets
Lesson objective:

Task 2
•Apply the reducing balance method formula to
calculate the depreciation expense for a given asset.
•Make appropriate ledger postings for the provision for
depreciation.

Discuss in groups & Solve walkthrough

pg. 159
12.5
 Date:

Format
Topic: Accounting or depreciation and disposal of
non-current assets
Lesson objective:
•Apply the reducing balance method formula to
calculate the depreciation expense for a given asset.
•Make appropriate ledger postings for the provision for
Kavita depreciation.

Nominal ledger
Fixtures Account
Date Details Fol $ Date Details Fo $
io lio
Bank 25000

Provision for depreciation Account

Date Details Fol $ Date Details Fo $
io lio
2004 Balance c/d 10000 2004 Income 10000
Jun Jun statement
30 30

10000 10000
2005 Balance c/d 16000 2005 Balance b/d 10000
Jun Jun (25000-
30 30 10000=15000*40
%)
Date Details Fol $ Date Details F $
io ol
io
2004 Balance c/d 10000 2004 Income 10000
Jun Jun statement
30 30
10000 10000
2005 Balance c/d 16000 2004 Balance b/d 10000
Jun Jul 1
30
2005 Income 6000
Jun statement
30 (25000-
10000=15000*40
%)
16000 16000
2006 Balance c/d 19600 2005 Balance b/d 16000
Jun Jul 1
30
2006 Income 3600
Jun statement
30 (15000-
6000=9000*40%)
19600 19600
 Date:
Topic: Accounting or depreciation and disposal of
non-current assets
Lesson objective:

Task 3
•Apply the reducing balance method formula to
calculate the depreciation expense for a given asset.
•Make appropriate ledger postings for the provision for
depreciation.

Partner Activity

Solve walkthrough 12.6 pg. 161

 Date:

Format
Topic: Accounting or depreciation and disposal of
non-current assets
Lesson objective:
•Apply the reducing balance method formula to
calculate the depreciation expense for a given asset.
•Make appropriate ledger postings for the provision for
Kavita depreciation.

Nominal ledger
Motor Vehicles Account
Date Details Fol $ Date Details Fo $
io lio

Provision for depreciation of Motor Vehicles Account

Date Details Fol $ Date Details Fo $
io lio
Calculation of depreciation Motor
vehicle A & B
Vehicle A (SLM) Jul 1- Jun 30 Vehicle B- Apr 1
9000*20%=1800 8000*20%*3/12=400

Kavita’s financial year

J F M Apr M Jun 30 Jul 1 A S O N D

2006 2005
 Date:
Topic: Accounting or depreciation and disposal of

Plenary non-current assets

Lesson objective:
•Apply the reducing balance method formula to
calculate the depreciation expense for a given asset.
•Make appropriate ledger postings for the provision for
depreciation.

1. How does the reducing balance method of depreciation allocate the cost of an asset
over its useful life?
a) Equal installments each period Answers
b) By a fixed percentage of the asset's book value b
c) By dividing the total cost by the number of years of useful life a
d) Based on the estimated salvage value of the asset c

2. What happens to the depreciation expense over the useful life of an asset under the
reducing balance method?
a) It decreases each period
b) It increases each period
c) It remains constant each period
d) It fluctuates each period

3. Which value is used to calculate depreciation expense for the reducing balance
method?
a) Salvage value
b) Accumulated depreciation
c) Book value of the asset
d) Original cost of the asset
 SUCCESS CRITERIA
I can I am not clear on I am a bit confused I can do the
this and need more help​​ tasks confidently​​

- Calculate depreciation by applying

Reducing balance method
- Understand the reason behind two
accounts being maintained when an
asset is purchased
- I can make an asset account

- I can make a provision for

depreciation account
- Analyse the debit & credit aspect of
transfer of provision of depreciation
account to income statement
 Date:
Topic: Accounting or depreciation and disposal of
non-current assets
Lesson objective:
•Apply the reducing balance method formula to

Homework calculate the depreciation expense for a given asset.

•Make appropriate ledger postings for the provision for
depreciation.

1.

She decided to depreciate at 10% per annum on reducing balance

method of depreciation.

2. Solve ESQ 1
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members YOU
ARE

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E!

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Thank You!