Hi, Just finishing off someone's accounts. I have the accountants TB and balance sheet from last year showing the depreciation of equipment. I'm having trouble working out how he has calculated the dep'n. It's probably really obvious but I can't see it
Plant & machinery 2012/13
cost b/f 8,642.73
cost additions 99.98
dep'n b/f -3,199.73
dep'n charge -831.98
Which I have put in the accounts as:(opening balance journals)
Plant & Machinery cost b/f 8,742.71
Plants & Machinery dep'n b/f 4031.71
No new equipment has been bought this year (13/14) I need to make a journal for dep'n BUT I cannot follow what has been done before.
If anyone can work this out I would be very grateful
It looks like 15% reducing balance. Either that or it's a coincidence that my calculations work out almost to the penny
Cost plus additions = £8,742.71. Deduct £3,199.73 depreciation b/f = £5,542.98. Multiply net by 15% = £831.45. The figures have probably been calculated to lose the pence from the NBV. Therefore this year would be last year's NBV multiplied by 15%, as there are no additions. This is £4,711 x 15% = £707 (keeping it rounded to lose the pennies).
I'm not very good at explaining it on paper but I hope that helps. Have a good Xmas!
Just as an addendum to Sue's note giving an alternate view.
You really need the fixed asset register from the accountant to work out the depreciation as it is unlikely to be a straight percentage of the outstanding balance.
The assets may include plant being depreciated over different time lines within a single total.
Generally the policy is a full years depreciation in the year of acquisition and nothing in the year of disposal but others pro rata depreciation to the number of months in the period in year of acquisition.
The previous years figures are often little help as assets become fully depreciated so the figures from the previous period alone are not a good indication of depreciation expectations for the current period.
Using old accounts may prove problematic if the business is over five years old as you will hit the same issues over different depreciation schedules. But, in the absence of other input data, if the client has the last 5+ years full accounts then from the notes to the accounts you may be able to work out the depreciation schedule from the additions combined with changes to depreciation over the periods.
If the business is younger than five years old then you should have no major issue recalculating the depreciation schedule from the notes to the full accounts.
Hope that helps, merry Christmas Rachel and Sue,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
You are right of course Shaun, and I was just taking the lazy accountant approach as I'm in Xmas mode this week . As it was P & M I was expecting to see it worked out using the RB method. It's a long time since I have come across plant being depreciated over different periods of time and it doesn't happen in any of the accounts that I see nowadays, but this is probably because my clients are all relatively small concerns and don't have much in the way of fixed assets anyway!
If it was computer equipment then it would probably have been SL and I agree that I would have not been able to work it out without seeing the register.
Your answer is far better than mine Shaun so thanks for your addendum Have a good one yourself!
Have a good one yourself!
