Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for December 2024 exams.
Get your discount code >>

Depreciation Example 1 – ACCA Financial Accounting (FA) lectures

Reader Interactions

Comments

  1. mr. Moffat what happens when we buy asset (say a car) and do not use it say for three years? Instead of depreciation charge we review it for impairment every single year. Is my understanding correct?

    Thank you

      • Thank you. Let me ask you this – when an asset is completely depreciated in real life, is there a limit on number of years it can still be used and therefore appear on our books before we write it off? Depreciation for cars is typically in region of 5 years, if CFO uses his beloved Aston Martin for 15 is there a problem?

        Thanks

  5. Hi John,

    Hope you are well, You explain in such detail and so interesting to listen to, making it so concise and easy to understand. Quick question please, is the carrying value the same meaning as residual/scrap value?

    Thank you & regards,
    Shazia.

  6. Hello,

    Awesome Lectures and congratulations for your work. However, I have a concern or a question, so to say. If we pay insurance for the car every year, would that be considered as a capitalized expenditure for the car or as a normal revenue expense? If it is a capital expenditure, do we have to add the insurance cost for the car (or maybe even repairment costs) to the value of the car at the end-year or should it be registered in the Financial Statement of Profit or Loss as a separate expense not related to the car value nor depreciation?

      • Hello there, just curious! Previously, it was said that insurance is the money we pay beforehand, so it is put in the Balance sheet/SOFP. And if we say this insurance is a revenue expenditure, it will go to SOPL instead. Can you help correct me on this? Appreciated!

      • Insurance is always revenue expenditure. It is usually paid in advance and all that appears on the SOFP is the amount of any overpayment / prepayment at the end of the accounting period. The expense for the period appears in the SOFP.

  7. Entertaining & useful lecture sir !

    Wish you brought the combination of the red pen back, though. It suited the screen much more making the notes more user friendly, alongside your nice good red tie.

  8. Thank you John. What about the scrap value of $2,000 at the end of the year? Would it be kept in FAR? if yes, how long would it be there in FAR if company doesn’t sale it for next many number of years.

    • I have no idea what you mean by “FAR”.

      If you are meaning the net amount that is shown on the Statement of Financial Position then that won’t be relevant for the exam. However in real life then if the asset was still being used they should continue to depreciate and would change their depreciation policy. Again, in real life businesses do not estimate a future sales value and are more likely anyway to use reducing balance depreciation.

Leave a Reply