Depreciation

This topic contains 8 replies, has 4 voices, and was last updated by Avatar of John Moffat John Moffat 6 months, 2 weeks ago. This post has been viewed 193 times

Viewing 9 posts - 1 through 9 (of 9 total)
  • Author
    Posts

  • Avatar of Murad
    Murad
    Participant
    • Topics: 11
    • Replies: 24

    we do not depreciate land..how do we record amount of money paying for land. if we pay for example 120000 $ for buying land, we will record it as an expense and will deduct the whole amount (120000$) from gross profit ???


    avatar
    ACCA
    Participant
    • Topics: 2
    • Replies: 12

    dr land cr cash


    Avatar of Murad
    Murad
    Participant
    • Topics: 11
    • Replies: 24

    no, i see you did not understand my question..


    avatar
    ACCA
    Participant
    • Topics: 2
    • Replies: 12

    yeah r u askng when we will prepare income statement or what?


    Avatar of Murad
    Murad
    Participant
    • Topics: 11
    • Replies: 24

    i will try to ask with example. for example i buy a plant for 500000 $ , of course i will not deduct all of 500000 $ from the gross profit in the income statement, we will depreciate it and we will deduct the amount of depreciation in the income statement.., BUT if i buy a land costing of 300000 $, i can not depreciate it, what will i do with it in the income statement? i will deduct the whole amount of 300000 $ from gross profit in the income statement?


    avatar
    Anne
    Participant
    • Topics: 5
    • Replies: 9

    With the $30,000 you have acquired an asset (i.e. the land). it is not an expense. It will not affect your gross profit. It will not appear in the income statement. It will appear in your Balance Sheet under Non-Current Assets. Your assets will increase. Your Profit & Loss will not be affected until you depreciate the asset and then only by the amount of the depreciation.


    Avatar of John Moffat
    John Moffat
    Keymaster
    • Topics: 3
    • Replies: 5949

    henlen is correct

    The reason that with other non-current assets and have an expense is simply because the asset does not last for ever – we spread the cost over the life.
    Land does last for ever and so there is no expense involved.

    (except the terminology :-)
    Balance Sheet is called Statement of financial position
    Profit & Loss is called Statement of profit or loss

    You should read chapter 6 of the Course Notes and watch the lectures that go with the chapter.


    Avatar of Murad
    Murad
    Participant
    • Topics: 11
    • Replies: 24

    thanks a lot..


    Avatar of John Moffat
    John Moffat
    Keymaster
    • Topics: 3
    • Replies: 5949

    You are welcome :-)

Viewing 9 posts - 1 through 9 (of 9 total)

You must be logged in to reply to this topic.