2. The following Statement of Financial Position was extracted from the books of Gagah Perkasa Sdn Bhd at 31 December 2018 and 2019. Gagah Perkasa Sdn Bhd Statement of Financial Position as at 31 December 2018 2019 RM RM RM RM Non-current Assets Buildings Fixtures less Depreciation Van less Depreciation 50,000 1,800 3,920 55,720 50,000 2,000 7,400 59,400 Current Assets Inventory Trade accounts receivables 5,600 6,400 12,400 8,200 Bank 900 Cash 220 200 13,120 68,840 20,800 80,200 TOTAL ASSETS Financed by: Capital account : Balance as at 1 January Add : Net Profit Cash introduced 37,040 35,200 52,540 21,160 10.000 83,700 (21.600) 72,240 (19.700) Less : Drawings 52,540 62,100 Non-current Liabilities Loan (repayable in 10 years' time) 10,000 15,000 Current Liabilities Account payable Bank overdraft TOTAL LIABILITIES TOTAL LIABILITIES AND CAPITAL 3,006 94 6,300 16.300 68,840 18.100 80,200 Additional information at 31 December 2019: • Fixtures bought in 2019 cost RM400. • Van bought in 2019 cost RM5,500.
2. The following Statement of Financial Position was extracted from the books of Gagah Perkasa Sdn Bhd at 31 December 2018 and 2019. Gagah Perkasa Sdn Bhd Statement of Financial Position as at 31 December 2018 2019 RM RM RM RM Non-current Assets Buildings Fixtures less Depreciation Van less Depreciation 50,000 1,800 3,920 55,720 50,000 2,000 7,400 59,400 Current Assets Inventory Trade accounts receivables 5,600 6,400 12,400 8,200 Bank 900 Cash 220 200 13,120 68,840 20,800 80,200 TOTAL ASSETS Financed by: Capital account : Balance as at 1 January Add : Net Profit Cash introduced 37,040 35,200 52,540 21,160 10.000 83,700 (21.600) 72,240 (19.700) Less : Drawings 52,540 62,100 Non-current Liabilities Loan (repayable in 10 years' time) 10,000 15,000 Current Liabilities Account payable Bank overdraft TOTAL LIABILITIES TOTAL LIABILITIES AND CAPITAL 3,006 94 6,300 16.300 68,840 18.100 80,200 Additional information at 31 December 2019: • Fixtures bought in 2019 cost RM400. • Van bought in 2019 cost RM5,500.
Chapter1: Financial Statements And Business Decisions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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