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Difficulty: EasyAccounting Treatment of Depreciation and Provision for Depreciation

Kano Retail Outlets acquired office furniture costing ₦1,500,000₦1,500,000 on 1 January 2024. Depreciation is charged at 10%10\% per annum using the straight-line method. What is the accumulated balance in the Provision for Depreciation on Furniture Account as of 31 December 2025?

Answer: 300000 ₦

Answer

The accumulated balance in the Provision for Depreciation Account as of 31 December 2025 is ₦300,000₦300,000.
The annual depreciation expense under the straight-line method is 10%×₦1,500,000=₦150,00010\% \times ₦1,500,000 = ₦150,000. Since the asset was held for two complete accounting years (from 1 January 2024 to 31 December 2025), the total accumulated provision credited to the Provision for Depreciation Account is ₦150,000×2=₦300,000₦150,000 \times 2 = ₦300,000.

Step-by-Step Solution

1
Calculate the annual depreciation expense for one year using the straight-line method
Annual Depreciation = 10%×₦1,500,000=₦150,00010\% \times ₦1,500,000 = ₦150,000
Under the straight-line method, depreciation is computed as a fixed percentage of the historical cost of the asset.
2
Multiply the annual depreciation expense by the number of accounting periods (2 years: 2024 and 2025)
Accumulated Provision for Depreciation = ₦150,000×2=₦300,000₦150,000 \times 2 = ₦300,000
The Provision for Depreciation Account accumulates total depreciation charged on the asset up to the balance sheet date.

Key Concept

Accounting Treatment of Provision for Depreciation
Estimated Time:45s
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Topics

Accounting Treatment of Depreciation and Provision for Depreciation

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