Page 24 - FR Integrated Workbook 2018-19
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Chapter 2
Depreciation
2.1 Definition
Depreciation is the systematic allocation of the depreciable amount of
an asset over its useful life.
Illustration 1
Depreciable amount
An entity purchases an asset at a cost of $80,000. The asset has an expected
useful life of 5 years and a residual value of $5,000 at current prices.
The depreciable amount is $80,000 – $5,000 = $75,000
2.2 Methods of depreciation
straight line
reducing balance
machine hours
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