Depreciation problems in the context of historic cost accounting.
Read Online

Depreciation problems in the context of historic cost accounting.

  • 684 Want to read
  • ·
  • 67 Currently reading

Published by [S. n.] in [S. l.] .
Written in English

Book details:

Edition Notes

This monograph was commissioned by Deloitte Haskins & Sells.

ID Numbers
Open LibraryOL14531402M

Download Depreciation problems in the context of historic cost accounting.


In accounting, an economic item's historical cost is the original nominal monetary value of that item. Historical cost accounting involves reporting assets and liabilities at their historical costs, which are not updated for changes in the items' values. Consequently, the amounts reported for these balance sheet items often differ from their current economic or market values. What is Depreciation?. In accounting terms, depreciation is defined as the reduction of recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible.. An example of fixed assets are buildings, furniture, office equipment, machinery etc.   Historical cost accounting is a well-established method of accounting all over the world because it is able to meet the legal requirements for financial reporting. Historical cost accounting has been able to provide information about the financial position, performance and changes in financial position of an enterprise to a wide range of users. The accounting for depreciation requires an ongoing series of entries to charge a fixed asset to expense, and eventually to derecognize it. These entries are designed to reflect the ongoing usage of fixed assets over time. Depreciation is the gradual charging to expense of an asset's cost over its expected useful reason for using depreciation to gradually reduce the recorded cost of a.

This is “Determining Historical Cost and Depreciation Expense”, section from the book Accounting in the Finance World (v. ). For details on it (including licensing), click here. This book is licensed under a Creative Commons by-nc-sa license. This cost cannot be charged as an expense in the accounting period in which it is purchased. In fact, such costs are spread over a number of periods. These periods refer to the span of tome over which the asset provides benefit to the business. Now, the cost thus spread over a number of periods refers to depreciation. Book value: Also called net book value. This refers to the balance sheet amount at a point in time that reveals the cost minus the amount of accumulated depreciation (book value has other meanings when used in other contexts, so this definition is limited to its use in the context of PP&E). IAS 16 outlines the accounting treatment for most types of property, plant and equipment. Property, plant and equipment is initially measured at its cost, subsequently measured either using a cost or revaluation model, and depreciated so that its depreciable amount is allocated on a systematic basis over its useful life. IAS 16 was reissued in December and applies to annual periods.

In accountancy, depreciation refers to two aspects of the same concept: first, the actual decrease of fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wears, and second, the allocation in accounting statements of the original cost of the assets to periods in which the assets are used (depreciation with the matching principle). Annual % X Historic Cost (Net Book Value = Historic Cost – Cumulative Depreciation) Prepared by D. El-Hoss Example. Same security system is bought for $25, and expected to last for 5 years.   Depreciation expense related to the coffee roaster each year would be $5, (($40, historical cost - $5, salvage value) / 7 years). Advantages and Disadvantages of Capitalized Costs. Definition of Book Depreciation. Book depreciation is the amount recorded in the company's general ledger accounts and reported on the company's financial statements. This depreciation is based on the matching principle of accounting. Example of Book Depreciation. Let's assume that equipment used in a business has a cost of $, and is.