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What is Fixed Assets? How many depreciation types are
there? How to apply depreciation on assets in a year?
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Answer Posted / hamdan
Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is a term used in accounting for assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets. In most cases, only tangible assets are referred to as fixed.
Depreciaton Types:
1.Straight Line method.
2.Reducing Balance Method/Written Down Value Method.
Depreciation is Calculated as:
The straight line depreciation method divides the cost by the life.
SL = Cost / Life
Example: A desk is purchased for $487.65. The expected life is 5 years. Calculate the annual depreciation as follows:
487.65 / 5 = 97.53
Each year for 5 years $97.53 would be expensed.
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