Hi I am new to bookkeeping. And have a question on depreciation. There is a question that is puzzling me and I need some help with it.
I am having to amend/adjust accounts in sage software in order to print off a revised profit and loss and balance sheet. And then perform a year end.
I am stuggling with the depreciation question. there are already depreciation amounts in the relevant accounts. then the question says I have to perform depreciation and post journals. So do I need to subtract the depreciation thats already in the accounts from the fixed asset then do depreciation on the amount left.
for example. say there is 120000 on the debit side in office equipment. And 25000 in the office equipment account on the credit side. So do I subtract the 25000 from 120000. Then do the depreciation on the 95000. so 5% of 95000. And when I get the depreciation post it the the relevant accounts to have my revised adjustment for the year end?
Also when it says no depreciation on the year of a disposal and a full years depreciation on the year of gaining a fixed asset. I know it sounds silly but what does this mean? Does it mean I charge depreciation to a new fixed asset bought . But not to a fixed asset that has been diposed of?
With your first question, I am assuming that it is a normal year end adjustment so it will depend on the type of depreciation.
If it a straight line depreciation it will be 5% of 120,000 posted DR Depreciation (Expense on P&L) and CR the appropriate Asset Depreciation account (for balance sheet)
If it is reducing balance depreciation, it will be 5% of the net book value (120,000 less 25,000), posted as above.
The question will (should) stipulate what type of depreciation
It is normal not to depreciate an asset in the year of disposal, as the disposal gain or loss will reflect this, and the question has specifically said to charge a full years depreciation on the year of aquisition so yes add a complete years depreciation for that year (that isn't normal but thats what the question states).
Is this question related to the selling of an asset and making the necessary P&L and balance sheet adjustments to show the gain/ (loss) ?
