Depreciation

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
can any one explain what is the purpose of depreciation, & why is it necessary to use different methods and rates of depreciation for different types of fixed asset. I just can't seem to explain myself very good when I have to write things down.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Depreciation

    Depreciation records the fall in value of an asset.

    E.g. You buy a van for £20,000 - it isn't going to be worth the same year after year.

    Straight line method records a steady fall in value throughout the asset's life (e.g. for a building), whereas reducing balance shows a larger fall in the first years (e.g. for a car).

    As for the rates - different classes of assets will have different economic lifes - a building will last longer than a van, etc.

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Depreciation

    Thanks Scott that really helps me.
    Got any tips on the best way to revise.
    Aly
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Depreciation

    Hi Aly.

    Go through all your notes - make sure you understand things, not just remember them. Do practice questions. Do the past papers off this site under exam conditions and to time.

    Take regular breaks and relax.

    You'll be fine.

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Depreciation

    Thanks I'll try and relax, I think its not knowing what is going to be on the exam paper is the worrying part.
    Thanks again
    Aly
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Depreciation

    There are detailed guidance notes on each unit in the 'Resource Centre'. Might be worth reading.

    Scott.

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