Chapter 9

Discussion in 'CT2' started by Kanishka, Aug 19, 2018.

  1. Kanishka

    Kanishka Active Member

    Why do disposals represent a negative in the depreciation calculation table?
     
  2. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    Tangible assets are held in the books at "original cost less accumulated depreciation". So a building might be held at £500k - 150k = 350k book value. If that building is sold, the original cost is removed from the trial balance, and the accumulated depreciation is also removed from the accounts. This represents a negative in the depreciation table.
     
  3. Kanishka

    Kanishka Active Member

    Thank you for clarifying.

    I have another doubt. In the statement of financial position for a particular year, do we subtract the accumulated depreciation from the asset or only the depreciation for that particular year?
     
  4. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    The asset is valued at original cost less accumulated depreciation for all previous years.
     
  5. Kanishka

    Kanishka Active Member

    But the depreciation for previous year would have already been deducted. So why would we subtract it again this year?
     
  6. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    We dont subtract it again. I am not sure what your question is here - perhaps it would be better if you could put some numbers together as to how you see the depreciation building up against a tangible asset, and how it disappears when the asset is sold. Then I can see where your problem lies.
     

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