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What is the accounting treatment for depreciation in the final accounts?
What is the accounting treatment for depreciation in the final accounts?
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Practice Questions
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What is the accounting treatment for depreciation in the final accounts?
It is added to the asset value
It is deducted from the asset value
It is recorded as a liability
It is ignored in the final accounts
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Depreciation is deducted from the asset value in the final accounts.
Questions & Step-by-step Solutions
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Q
Q: What is the accounting treatment for depreciation in the final accounts?
Solution:
Depreciation is deducted from the asset value in the final accounts.
Steps: 6
Show Steps
Step 1: Understand that depreciation is the reduction in value of an asset over time.
Step 2: Identify the asset that is being depreciated (e.g., machinery, vehicles).
Step 3: Calculate the amount of depreciation for the accounting period using a method (like straight-line or declining balance).
Step 4: Deduct the calculated depreciation amount from the original value of the asset in the final accounts.
Step 5: Record the depreciation expense in the income statement to reflect the cost of using the asset.
Step 6: Update the asset's book value on the balance sheet to show its reduced value after accounting for depreciation.
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