Depreciation Schedule

This week our topic in our business math subject is all about depreciation schedule. Depreciation schedule is  an accounting procedure for determining the amount of value left in a piece of equipment. In my opinion this our easiest topic so far. Maybe because I understand it easily even it is very cold in the classroom and it is easy to solve the problem given to us in our seat work.


It is very important to know what is depreciation schedule because so that we can accept that in a business the product will not always have the same value because when time goes by it's demand will go down so the sales wil also lessen.


 Purposes:
1. to provide for the recovery of capital which has been invested in physical property .
2. To enable the cost of depreciation to be charged to the cost of producing products or services that results from the use of the property.




 To further understand depreciation here are some terminologies that are related to it:

Depreciation is the decrease in the value of physical property with the passage of time. The yearly deposits into the depreciation fund are called depreciation charges. The depreciation fund is the portions of a given amount at the end of its useful life or the difference between the original cost of the asset and the sum in the depreciation fund is called the book value of the asset. At the end of the year.


There are many types of depreciation which are:
1,Physical depreciation-is due to the lessening of the physical ability of the property to produce results.Its common causes are wear and deterioration.
2. Functional depreciation- is due to the lessening in the demand for the function which the property was designed to render. Its common causes are inadequacy ,changes in styles, population centers shifts, saturation of markets or more efficient machines are produced.
3. depreciation due to changes in price levels is almost impossible to predict and therefore is not considered in many economy studies.
4. Depletion refers to the decrease in the value of a property due to gradual extraction of its content.


Solving the depreciation:


In getting the depreciation the formula is:
Depreciation=  cost- scrap value
average yearly depreciation= depreciation/ years


Here is an example given to us by our professor: Crisencio M.Paner, may this be a guide to you in computing for the depreciation A machine cost 20,000 has an estimated scrap value of 4000 and a probable life of 40,000 hours .a.) Find the depreciation cost per operating hours. b) prepare a depreciation schedule showing the book value for each of the 4 years of the machines's life during which the hour of operation are 10,000,9000,12,000,15,000




solution:
 Depreciation=  cost- scrap value=20,000-4000=16000


charge for operating hours: 16,000/40,000= 0.40/hr




                                            

Year	Hours of operation	Depreciation Charge	Amount in depreciation Fund	Book Value at the end of the year
0	0	0	0	20,000
1	10,000	10,000 (0.4)        =4,000	4,000	16,000
2	9,000	9,000 (0.4)=3,600	7,600	12,400
3	12,000	12,000 (0.4) =4,800	12,400	7,600
4	9,000	9,000   (0.4) =3,600	16,000	4,000
TOTAL	40,000	16,000

I hope this example will help you in you in computing for your depreciation. Have a nice day!




Checked by .Prof Crisencio M. Paner