GRADE 11 LESSON

20

FIXED ASSETS

DEPRECIATION

WORKSHEET 4
Baseline assessment - Recording depreciation

EXAMPLE 2

INFORMATION
The financial year ends on 30 June each year.
The balances appear in the General Ledger on 1 July 2010 as follows:
Vehicles R49 000
Accumulated depreciation on vehicles R 9 800

REQUIRED
1 Calculate depreciation on 30 June 2011 at 20% p.a. on cost price
2 Show the depreciation section of the asset register
3 Record the information in the following ledger accounts:
Vehicles
Accumulated depreciation
Depreciation
4 Show the Tangible Asset Note to the Financial statements
5 Show how the information will appear in the Balance sheet

ANSWER

1 Calculation of depreciation on 30 June 2011

49 000 x 20 x 12 = R9 800
1 100 12

20 Accounting Grade 11 - CAPS 1

2 Asset register

Accumulated
Date Cost Depreciation depreciation Book value
1 Jul 2009 49 000 49 000
30 Jun 2010 9800 9800 39 200
30 Jun 2011 9800 19 600 29 400

3 Recording in General Ledger

GENERAL LEDGER
Vehicles
2010 1 Balance b/d 49 000
Jul

Accumulated depreciation on vehicles

2010 1 Balance b/d 9 800
Jul
2011 30 Depreciation 9 800
Jun

Depreciation
2011 30 Accumulated 9 800
Jun depreciation on
vehicles

4 Note to Financial statements

Note 3 – Tangible / Fixed assets

Vehicles
Cost 49 000
Accumulated depreciation (9800)
Carrying value end of last year 39 200
Movements
Additions at cost
Disposals at carrying value
Depreciation for the year (9800)
Carrying value end of current year 29 400
Cost 49 000
Accumulated depreciation (19600)

5 Balance sheet
BALANCE SHEET
ASSETS
CURRENT ASSETS
Fixed assets 29 400

20 Accounting Grade 11 - CAPS 2

 ACTIVITY 7

INFORMATION
The financial year ends on 31 December each year.
The following balances appeared in the General Ledger on 1 January 2011 as follows:
Equipment R40 500
Accumulated depreciation R 4 500

REQUIRED
1 Calculate depreciation on 31 December 2011 at 10% p.a. on the diminishing balance
method.
2 Show the depreciation section of the asset register
3 Record the information in the following ledger accounts:
Vehicles
Accumulated depreciation
Depreciation
4 Show the Tangible Asset Note to the Financial statements
5 Show how the information will appear in the Balance sheet

ANSWER

1 Calculation of depreciation

2 Asset register

Accumulated
Date Cost Depreciation depreciation Book value
1 Jan 2010 45 000 0 0 45 000
31 Dec 2010 4 500 4 500 40 500
31 Dec 2011

20 Accounting Grade 11 - CAPS 3

3 Recording in General Ledger

GENERAL LEDGER

Vehicles

Accumulated depreciation on vehicles

Depreciation

4 Note to Financial statements

Note 3 – Tangible / Fixed assets
Vehicles
Cost
Accumulated depreciation
Carrying value end of last year
Movements
Additions at cost
Disposals at carrying value
Depreciation for the year
Carrying value end of current year
Cost
Accumulated depreciation

5 Balance sheet

BALANCE SHEET

ASSETS
CURRENT ASSETS
Fixed assets

20 Accounting Grade 11 - CAPS 4

 ACTIVITY 8

REQUIRED

Refer to Activity 7 and answer the following questions.

1 State the method of depreciation used by the business

2 What is the amount of accumulated depreciation on 31 December 2011.

3 Analyse the double entry for depreciation on 31 December 2011

Account debited Account credited Amount A OE L

4 Classify the following accounts

Depreciation
Accumulated depreciation on vehicles

5 Explain your classification for accumulated depreciation

6 How does the diminishing balance method differ from the cost price method?

7 What happens to the amount of depreciation each year when the diminishing balance
method is used?

20 Accounting Grade 11 - CAPS 5

8 According to which method will an asset depreciate faster?

9 Why will you not consider changing the method from year to year?

10 State the amount that appears in the Vehicles account in the General Ledger

11 State the amount that appears in the Balance sheet in respect of vehicles on
31 December 2011

12 Explain the GAAP principle applied to your answer in 10 and 11 above.

No 10

No 11

20 Accounting Grade 11 - CAPS 6

 ANSWERS LESSON

20

ACTIVITY 7

1 Calculation of depreciation

40 500 – 4 500 = 36 000

Depreciation = 36 000 x 10% = 3600

2 Asset register

Accumulated
Date Cost Depreciation depreciation Book value
1 Jan 2010 45 000 0 0 45 000
31 Dec 2010 4 500 4 500 40 500
31 Dec 2011 3 600 8 100 36 900

3 Recording in General Ledger

GENERAL LEDGER

Vehicles
2011 1 Balance b/d 40 500
Jan

Accumulated depreciation on vehicles

2011 1 Balance b/d 4 500
Jan
2011 31 Depreciation 3 600
Dec

Depreciation
2011 31 Accumulated 3 600
Dec depreciation on
vehicles

20 Accounting Grade 11 - CAPS 7

4 Note to Financial statements

Note 3 – Tangible / Fixed assets

Vehicles
Cost 45 000
Accumulated depreciation (4 500)
Carrying value end of last year 40 500
Movements
Additions at cost
Disposals at carrying value
Depreciation for the year (3 600)
Carrying value end of current year 36 900
Cost 45 000
Accumulated depreciation (8 100)

5 Balance sheet

BALANCE SHEET
ASSETS
CURRENT ASSETS
Fixed assets 36 900

ACTIVITY 8

1 State the method of depreciation used by the business

Diminishing balance method

2 What is the amount of accumulated depreciation on 31 December 2011.

R8 100

3 Analyse the double entry for depreciation on 31 December 2011

Account debited Account credited Amount A OE L
Depreciation Accumulated
depreciation on vehicles 3 600 -3 600 -3 600 0

4 Classify the following accounts

Depreciation Expense
Accumulated depreciation on vehicles Negative asset

20 Accounting Grade 11 - CAPS 8

5 Explain your classification for accumulated depreciation

A negative asset shows a reduction in the value of an asset

6 How does the diminishing balance method differ from the cost price method?

DBM – depreciation is calculated on the carrying value / book value =

Cost minus accumulated depreciation.

7 What happens to the amount of depreciation each year when the diminishing balance method is
used?

It is decreasing progressively

8 According to which method will an asset depreciate faster?

Cost

9 Why will you not consider changing the method from year to year?

So that the method remains consistent.

Reasonable comparison can be made.

10 State the amount that appears in the Vehicles account in the General Ledger

R45 000

11 State the amount that appears in the Balance sheet in respect of vehicles on 31
December 2011

R36 900

12 Explain the GAAP principle applied to your answer in 10 and 11 above.

No 10 Historical cost - it can be proved

No 11 Matching - Values must match the financial year

20 Accounting Grade 11 - CAPS 9