- useful when making a financial statement
- it gives you an idea when to purchase or replace a physical asset
Key Terms:
- Depreciation - the lost in value of physical assets through its use
- Depreciation Charges - the yearly deposits into the depreciation fund
- Depreciation Fund - portions of a given amount at the end of its useful life
- Book Value of Asset - sum in the depreciation fund
Sample problem
A laptop costing ₱ 28,000 has usability for 4 years and it has a scrap value of ₱ 2,500. Find the average yearly depreciation. Prepare a depreciation schedule showing the book from year to year.
Depreciation = Cost - Scrap Value
₱ 28,000 - ₱ 2,500
= ₱ 25,500
Average yearly depreciation
₱ 25,500 = ₱ 6,375
4
The yearly depreciation is ₱ 6,375 each year.
