• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Depreciation of fixed assets.

Extracts from this document...

Introduction

Depreciation Fixed assets are used again and again over a long period of time. During this time the value of many assets falls. This is called depreciation. Each accountants must work how much depreciation to allow each fixed assets. ...read more.

Middle

Depreciation is shown in the profit and loss account under expenses. This indicates that part of the original value is 'used up' each year. Eventually the entire value of the assets will appear as expenses, when the assets depreciate fully. ...read more.

Conclusion

If the original value of the assets were placed on the balance sheet this would overstate the value. Each value of the assets falls each year as they depreciate. * Fixed assets generate profit many years. It seems logical to write off the value of the assets over a whole period of time rather than when it is first bought. This matches the benefits from the assets more closely with cost. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Here's what a star student thought of this essay

3 star(s)

Response to the question

In summary, the student has written a clear report. The report states what deprecation is and how this is applied to fixed assets within the buisness. However the report doesn't state how some assets may increase. In addition, the report ...

Read full review

Response to the question

In summary, the student has written a clear report. The report states what deprecation is and how this is applied to fixed assets within the buisness. However the report doesn't state how some assets may increase. In addition, the report could include an example of an Profit And Loss Account and Balance Sheet which has Deprecation. The student clearly understands that assets will lose value over a certain time length. In addition, the student understands that the asset will be worth nothing, if the buisness keeps the asset for as long as the asset is worth something. However the student hasn't considered assets, which increase in value, such as buildings. Buildings, such as Stores, Warehouses and Offices may increase in time, and this will need updating on the Balance Sheet to present the new value of the business.

Level of analysis

The report states that fixed assets lose value over time. However there haven't explained why this occurs. I understand that this may be 'common sense', although this is worth placing within the report. The report could include 'Deprecation occurs, due to the amount paid for the item is less than the asset sale price, which can be achieved if the buisness were to sell the asset. This is due to the asset has occurred wear and tear, and this decreases the value of this item. Thus, by the de-valuing of the asset, this is an expense of the buisness and should be included on the Profit And Loss Account'.

Quality of writing

The writing style is basic. The student doesn't attempt to use words which are more difficult, and this shows the exmainer that there are unwilling to use some of the technical terms which are expected for high marks.


Did you find this review helpful? Join our team of reviewers and help other students learn

Reviewed by danielbeal 05/04/2012

Read less
Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Accounting & Finance essays

  1. Errors that do not affect the Trial Balance.

    Example: a sale of Lm 91 to S. Dalli was entered in the books as Lm 19. an entry of another Lm 72 of sales is needed. Journal Dr. Cr. Lm Lm S. Dalli 72 Sales account 72 Correction of error whereby sales were understated by Lm 72 Compensating Errors.

  2. Unit 5 Introduction to Accounting

    The company issuing the shares will receive �1 for each share issued. Ordinary shares are the riskiest form of investment in a company since there may be no dividends paid and the market value of shares might fall after they have been bought.

  1. Compare the final accounts of two organisations explaining the similarities and differences.

    their business income is counted alongside any other personal income they have for tax purposes, so accounting is relatively straightforward. Their tax is calculates via the annual self assessment process. So which means the sole trader will have to pay tax on their profits.

  2. The Purpose of Keeping Accurate Accounts

    Good record keeping is vital in regards to meeting the financial commitments of the business and providing information on which decisions for the future of the business can be based. While the business maintains records to monitor and record its normal business activities, it is also necessary because of obligations under the taxation laws.

  1. Profit and Loss Account

    It will be crucial for my for my business to ensure that it has more money coming in than going out. This is called cash flow. Poor management of cash flow is the main reason for business failure. On the other hand good management of cash flow will give my DJ business a good chance of being successful.

  2. Compare and contrast the approach of the US and UK financial regulatory bodies and ...

    Therefore they need to adopt a kind of international recognised accounting standards attract the foreign investors. In general, investors prefer one set of accounting standards in order to make the accounts from different countries be more comparable. Therefore by using one set accounting rules, it is much more easy for

  1. Harmonisation of accounting standards in Europe

    These were issued jointly by the IASC and other standard-setters in 2000, for the introduction of a new standard on financial instruments based on a full 'fair value' model. In order to determine whether the IASB has been effective in promoting harmonisation of accounting standards it is necessary to establish the criteria by which effectiveness should be measured.

  2. If You Were a Teacher How Would You Teach Personal Finance and What Lessons ...

    The pupils would have a starting income and a list of compulsory costs which are essential for living.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work