All assets required by a company are known as purchases (assets). What are these assets? It can consist of objects or rights that can be controlled and obtained from past business activities. The form can be physical or rights that have economic value. Look at depreciation expense journal entry website for more information about depreciation expense journal entry.
While the types of temporary, namely:
Current assets, for example, cash, accounts receivable, short-term deposits, securities, income receivables, prepaid expenses, inventory of merchandise, office equipment, and so on.
Fixed assets, for example, buildings, land, production machinery, office equipment, transport equipment, and so on. Intangible fixed assets, for example, patents, property rights, good intentions, rental rights, trademarks, franchises, and so on.
Long-term investment, for example: investing in other companies.
Next, I will discuss more remains.
Fixed assets
You need to know that all must remain (except land) will be returned to use and become a burden for the company. To calculate the expense, it is done by calculating the agreed price fixed with its useful life. Reject, the process is known as depreciation (depreciation).
For fixed calculations and reporting, two principles need to be considered, namely:
- Cost principle (cost principle)
Under this principle, depreciation expense is issued based on the historical value of a fixed agreed price recorded in the statement of profit/loss and transfer
- The principle of matching (the law of matching)
This principle explains the costs to remain allocated to depreciation costs following the useful life.
And to calculate depreciation can be done by two methods, namely: the straight-line method and the accelerated method. Of the two types of techniques, the straight-line method is the simplest and most widely used method. Calculation using the straight-line method, namely: C – RV / EA.
Information :
C: Cost
RV: Residual value
EA: Economic age
Example of Calculation of Fixed Assets
For example, A company buys a production machine for Rp. 240,000,000 with a residual value of Rp. 60,000,000 and is estimated to have a use-value of ten years. So, the way to calculate the amount of depreciation every year is to divide the acquisition cost of the vehicle by the estimated useful life.
So the calculation = (Rp. 240,000,000- Rp. 60,000,000) / 10 years
= Rp. 18,000,000 / year
To find out the amount of depreciation each year, can be seen in the following table
Years to Depreciation (D) Accumulated depreciation (K) Total Accumulated depreciation Book Value of Assets (N) = N-K
0 Rp.240,000,000
1 Rp.18,000,000 Rp.18,000,000 Rp.18,000,000 Rp.222,000,000
2 Rp.18,000,000 Rp.18,000,000 Rp.36,000,000 Rp204,000,000
3 Rp.18,000,000 Rp.18,000,000 Rp.54,000,000 Rp.186,000,000
4 Rp. 18,000,000 Rp. 18,000,000 Rp. 72,000,000 Rp. 168,000,000
5 Rp.18,000,000 Rp.18,000,000 Rp.100,000,000 Rp150,000,000
6 Rp.18,000,000 Rp.18,000,000 Rp.108,000,000 Rp.132,000,000
7 Rp.18,000,000 Rp.18,000,000 Rp.126,000,000 Rp.114,000,000
8 Rp. 18,000,000 Rp. 18,000,000 Rp. 144,000,000 Rp. 96,000,000
9 Rp.18,000,000 Rp.18,000,000 Rp.192,000,000 Rp.78,000,000
10 Rp.18,000,000 Rp.18,000,000 Rp180,000,000 Rp.60,000,000
And to record it in a journal in the first year to the tenth year, namely:
Production machine depreciation expense is Rp 18,000,000
Accumulated depreciation of Rp 18,000,000
Meanwhile, to record adjustments at the end of the first year to the tenth year, namely:
Accumulated depreciation of Rp 18,000,000
The production machine is Rp. 18,000,000
What if, in the fifth year, a reversing journal was made? Then made as follows:
The production machine is Rp. 18,000,000
Accumulated depreciation of Rp 18,000,000
Then for the journal at the end of the fifth year, namely:
Accumulated depreciation of Rp 90,000,000
Production machines Rp. 90,000,000
That’s a brief discussion of the Journal of depreciation of fixed assets and examples. If you find this article useful, then don’t forget to share it with other readers.
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See more:
What is Accrued Income | Accounting Knowledge
What Is a Financial Record and How Can I Use It for Investing
About Revenue & Profit
Definition of Intangible Assets and Benefits, Characteristics and Types
What is the process of accounting?
What is Depreciation?
