Re: Calculating Depreciation

On Nov 22, 10:34 am, Ronald Raygun <no.s...@xxxxxxxxxxxxxxxxxxxxx>
wrote:
desperad...@xxxxxxxxxxxxxx wrote:
Looking at my old end of year accounts, I am trying to understand how
the depreciation has been calculated.

The depreciation is calculated using '-50% on cost and 25% on cost'.
The figures I have are:

Cost at year start: £5802
Additions: 542
Total: 6344

Depreciation:
at year start: 3822
charge for year: 631
Total: 4453

NBV:
at year end: 1891
at year start: 1980

I've tried to work out how the figure of £631 was calculated and just
can't.

I can. It looks like he is using the reducing balance method, using
the 25% rate only, and not 50% at all. If he were using both rates,
there would be two asset classes, one of which would be depreciated
at one rate, and one at the other. He should then have separate cost
and depreciation accounts for each of the two asset classes, and then
the above figures would represent the sums of the respective figures
from the two classes.

He is depreciating old assets at 25% of book value, and new additions
at 25% of cost (i.e. of their original book value) during the year of
acquisition.

Thinking about it like this, it's pretty obvious where the 631 comes
from. It's 25% of (1980+542), rounded up.

That's what I was thinking HOWEVER what threw me was the previous
years accounts (from the same accountant) that had a Cost of 4498 (NBV
of 1624) at the start of the year and new additions of 1304 throughout
the year.

This gives a total of 5802 and 25% of that is 1450.50 - he has a
charge for the year as 948. Even if we take 4498 at 25% at 1304 at 50%
(as it was mentioned that the statement says that it's 50% for new
assets) that is 1124.50 and 652 which is 1776.50.

It looks like maybe they had an asset register that they have basing
their depreciation?

So what we've said is correct and his previous years depreciation
amount (just above) is wrong ? The previous year has the same '-50% on
cost and %25 on cost' statement in the notes.

What I have been doing is trying to work out where the figure comes
from and then refer to the previous years accounts to see if it tallys
- if it doesn't I think I've made a mistake. You can see why I'm
confused.
.

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