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How is depreciation typically recorded in the final accounts of a sole trader?
How is depreciation typically recorded in the final accounts of a sole trader?
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Practice Questions
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Q1
How is depreciation typically recorded in the final accounts of a sole trader?
As an asset
As a liability
As an expense
As revenue
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Depreciation is recorded as an expense in the final accounts, reducing the profit for the period.
Questions & Step-by-step Solutions
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Q
Q: How is depreciation typically recorded in the final accounts of a sole trader?
Solution:
Depreciation is recorded as an expense in the final accounts, reducing the profit for the period.
Steps: 5
Show Steps
Step 1: Understand that depreciation is the reduction in value of an asset over time.
Step 2: Know that a sole trader needs to keep track of their assets, like equipment or vehicles.
Step 3: Calculate the amount of depreciation for the period (usually a year).
Step 4: Record the depreciation amount as an expense in the profit and loss account.
Step 5: This expense will reduce the total profit shown in the final accounts.
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