Match each accounting transaction or statement item regarding depreciation with its corresponding ledger entry or financial statement treatment.
- Annual depreciation charge for the accounting periodDebit Profit and Loss Account, Credit Provision for Depreciation Account
- Reduction in the required provision for depreciation at year-endDebit Provision for Depreciation Account, Credit Profit and Loss Account
- Transfer of accumulated depreciation on an asset disposed ofDebit Provision for Depreciation Account, Credit Asset Disposal Account
- Presentation of accumulated depreciation in the Statement of Financial PositionDeduction from the historical cost of non-current assets under Fixed Assets
Answer
Annual depreciation charge matches Debit Profit and Loss Account and Credit Provision for Depreciation Account; Reduction in required provision matches Debit Provision for Depreciation Account and Credit Profit and Loss Account; Transfer of accumulated depreciation on asset disposed matches Debit Provision for Depreciation Account and Credit Asset Disposal Account; Presentation of accumulated depreciation matches Deduction from historical cost of non-current assets under Fixed Assets.
Each depreciation item is correctly paired with its accounting treatment: charging annual depreciation requires debiting Profit and Loss and crediting Provision for Depreciation; reducing provision requires debiting Provision for Depreciation and crediting Profit and Loss; removing accumulated depreciation on asset disposal requires debiting Provision for Depreciation and crediting Asset Disposal; and presenting accumulated depreciation requires deducting it from historical cost on the Statement of Financial Position.
Step-by-Step Solution
Key Concept
Accounting Treatment of Depreciation and Provision for Depreciation