My 'customer' has fixed assets worth £1512, with no residual value at the end of the 4 year life span.
At the end of the first two months, the depreciation is £63 - is this the same as the accumulated depreciation? I'm thinking that at the end of another two months the accumulated depreciation would be £126 - yes?
Yes, you are right. £1512 divided by life of 4 years = £378 per annum divided by 12 months = £31.50 per month. 2 months = £63 so 4 months would be £126.
Can I just confirm: The depreciation account would have the current period depreciation - in this case £63 for two months and would the accumulated depreciation be the remaining months of the year - in this case 10 x 31.50?
The current month's depreciation is debited to the Profit & Loss account (expense to the company) and credited to the depreciation provision account. The depreciation provision account will show the accumulated depreciation.
The amount of the accumulated depreciation is then deducted (credited) from the cost of the fixed asset in the Balance Sheet at period end, leaving a net book value for the asset.
