I am still studying at the moment (ICB Level 2) and just wondered if anyone could clarify something for me re depreciation.
If a business has numerous fixed assets is it neccassary to have a depreciation expense a/c & depreciation provision a/c for each individual asset as every example in my manual seems to be for businesses with only 2 assets! I imagine there are plenty that have maybe 15 or 20 listed under different headings ie Fixtures & Fittings, machinery, vehicles etc
Surely even if they are all grouped together within their individual catergories it would cause a problem if you were to dispose of one of them? I'm just thinking if each asset required essentially 3 a/cs to deal with it thats a lot of ledger space!
I would have a provision account for each fixed asset a/c that would be depreciated, so one for fixtures and fittings, one for equipment and so on each of which could contain many assets to be depreciated. Your depreciation a/c can just be one account where all your depreciation costs for the year end up.
That does make more sense, dealing with depreciation is one of the areas I find more confusing
Victoria
It is confusing at first, it all seems to come together though when you step back and look at it logically. The best way for me was to draw all the T accounts, fixed assets, provision etc and work through them whilst all of them are on one page in front of me.
