DEPRECIATION AND DISPOSAL OF NON-

CURRENT ASSETS
Chapter 12
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 Date:
Topic: Accounting or depreciation and
disposal of non-current assets
Lesson objective:
- Define Reducing balance method
- Calculate depreciation by applying
Reducing balance method\

LEARNING OBJECTIVES

- Define Reducing balance method

- Calculate depreciation by applying Reducing balance method
 Date:
Topic: Accounting or depreciation and
disposal of non-current assets

STARTER ACTIVITY
Lesson objective:
- Define Reducing balance method
- Calculate depreciation by applying
Reducing balance method\

What is depreciation, and why do businesses depreciate their

assets?
Businesses depreciate their assets to accurately reflect their diminishing value over time
due to wear and tear, obsolescence, or other factors.

How does straight-line depreciation work, and what are its

advantages and limitations?
Straight-line depreciation allocates an equal amount of depreciation expense to each
period of an asset's useful life. Formula : (Cost of asset - Salvage value) / Useful life

What is the difference between book value and salvage

value(residual value) of an asset?
The book value of an asset represents its remaining value after accounting for
accumulated depreciation, while salvage value refers to the estimated value the asset
will have at the end of its useful life.
 Date:
Topic: Accounting or depreciation and
disposal of non-current assets
Lesson objective:
- Define Reducing balance method
-
Let’s watch a video
Calculate depreciation by applying
Reducing balance method\
 Date:
Topic: Accounting or depreciation and
disposal of non-current assets
Lesson objective:

Task 1
- Define Reducing balance method
- Calculate depreciation by applying
Reducing balance method\

Discuss in groups & write

Q1) What is reducing balance method?

Q2) What are its advantages & disadvantages?

Read pg. 157

 Date:
Topic: Accounting or depreciation and
disposal of non-current assets
Lesson objective:

Task 2
- Define Reducing balance method
- Calculate depreciation by applying
Reducing balance method\

Two-person Team

Solve walkthrough 12.3

pg. 157
 Date:
Topic: Accounting or depreciation and
disposal of non-current assets
Lesson objective:
-

Solution
Define Reducing balance method
- Calculate depreciation by applying
Reducing balance method\

Cost 25000

Depreciation for year ended 30 June 2004 at 40%(25000*40%)

Book value at 1st July 2004
Depreciation for year ended 30 June 2005 at 40% (15000*40%)
Book value at 1st July 2005
Depreciation for year ended 30 June 2006 at 40% (9000*40%)
Book value at 1st July 2006
Depreciation for year ended 30 June 2007 at 40% (5400*40%)
Book value at 1st July 2007

Bo o k V alue=
Net T otal
r i c e -
Cost p n to date
i a ti o
deprec
 Date:
Topic: Accounting or depreciation and
disposal of non-current assets
Lesson objective:
- Define Reducing balance method

EXTENSION TASK - Calculate depreciation by applying

Reducing balance method\

A Security system is bought for $35000 and its depreciation is calculated

at 10% p. a.
Calculate depreciation & book value for five years using straight line and
reducing balance method

Straight –line Reducing balance method

method

Year Depreciation Book value Year Depreciation Book value

$ $ $ $

0 35000 0 35000

1 1

2 2

3 3

4 4

5 5
 Date:
Topic: Accounting or depreciation and

Plenary disposal of non-current assets

Lesson objective:
- Define Reducing balance method
- Calculate depreciation by applying
Reducing balance method\

1. Which of the following statements accurately describes the straight-line depreciation

method? Answers
A) It allocates depreciation expenses evenly over the asset's useful life. A
B) It results in higher depreciation expenses in the earlier years of an asset's life. A
C) It is also known as the diminishing balance method. A
D) It does not consider the salvage value of the asset.
2. What is the primary advantage of the reducing balance method over the straight-line
method?
A) It provides a more accurate reflection of an asset's diminishing value over time.
B) It is simpler and easier to calculate.
C) It results in lower depreciation expenses in the earlier years of an asset's life.
D) It allocates depreciation expenses evenly over the asset's useful life.
3. In the reducing balance method of depreciation, what happens to the depreciation
expense over time?
A) It decreases gradually each period.
B) It remains constant throughout the asset's useful life.
C) It increases gradually each period.
D) It fluctuates depending on the asset's market value.
 Date:
Topic: Accounting or depreciation and
disposal of non-current assets
Lesson objective:
- Define Reducing balance method

Homework
- Calculate depreciation by applying
Reducing balance method\

1. Calculate how much depreciation will be charged in Koala’s

income statement for the next three years under reducing
balance method of depreciation.
2. What are the advantages & disadvantages of reducing balance
method?(pg. 157)
3. What is Net Book Value?
4. Which is the best method of depreciation for Koala’s asset? Why?
 SUCCESS CRITERIA
I am not clear on I am a bit confused I can do the
I can
this and need more help​​ tasks confidently​​
- Understand the meaning of reducing
balance method
- Analyse it’s benefits & limitations.

- Calculate depreciation by applying

Reducing balance method
- Differentiate the calculation methods
of straight line as well as reducing
balance.
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