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Reducing balance with a residual value - for example cost £2500, residual value of £500. I have previously started the depreciation from the cost ie £2500, which is also what i have read on the ICB website but my tutor is telling me that's wrong, i should deduct the residual value and start the depreciation from this figure (so cost is taken to be 2000 and this would be the cost on the balance sheet). It just doesn't make sense to me. Is this the new way of doing it? Which is right in an exam?
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I would agree with you, that the cost should be shown as the full cost. One thing I have learned is that tutors are not always right. You'll get the same answers, but I think the real cost should be shown on the balance sheet under cost.
Kris
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Confused - you have certainly confused me, unfortunately your question does not appear to be clear and some of the crucial information may be missing.
May I suggest that you get clarification from your tutor?
Geoff
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I’m thinking that your tutor may be advising that the depreciation should be calculated on the Depreciable Amount of the asset (£2000), which is the Cost (£2500) less Residual (£500). Although, in practice, the residual value of an asset is often insignificant and therefore immaterial in the calculation of the depreciable amount (International Accounting Standard 16). The initial cost of the asset on the Balance Sheet would still be recorded as £2500.
You really should get further clarifaction from your tutor as to his instructions.
Edited at 30 Oct 2011 10:29 PM GMT
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Hi Confused
You would take the 500 off the 2500 and work our your depreciation on the 2000 figure.
You would show the full cost of 2500 in the balance sheet though and not 2000
Hope this makes it clearer for you.
Kind regards
Lesley Smith
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Is it me or is it staggering an affiliate and AICB or giving answers at an MICB level??
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- Member PM.Dip
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Stuart Wildmansaid:
“Is it me or is it staggering an affiliate and AICB or giving answers at an MICB level??”
Until you pointed it out I was unaware this was in the level 3 section. The affiliate in question probably did the same as me and clicked on the recent posts link. Depreciation is a level 2 subject.
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Peasie is spot on. Is that wrong? Normally when I click an area it doesn't want me in, it tells me.
However, given that my answer is the same as lesleys, albeit a little less eloquent perhaps, I assume there is no issue.
I may be AICB, but the reason I have not taken the level3 exams is because I'm partway through an HNC in Accounting which covers much of the level 3, and ICB have agreed to accept the course as an exemption for this. Depreciation was covered way back in year 1.
I would suggest it can be folly to assume because someone only holds a lesser qualification with the institute that their knowledgebase is lower, like myself they may be studying elsewhere. Actually I can see that my HNC covers a lot of the level 4 stuff as well.
Kris
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Stuart Wildmansaid:
“Is it me or is it staggering an affiliate and AICB or giving answers at an MICB level??”
I appreciate the helpful replies to my post; this inaccurate assumption isn't one of them. I am studying level 3 and my post relates to this course.
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I agree with Peasie and Kris.
I am not working at present and due to financial restraints, I am unable to afford to update my membership to the level I have achieved with the ICB exams, (I have just passed level 3 manual) so I am still a Student.
I achieved my AAT qualification and have years of experience. Much of Level 4 Diploma in Financial Management I studied with the AAT and have used during my working life.
Remember that there are members who have to be Student, Affiliate or Associate member's because they have not yet passed the exams, have other qualifications and years of experience, but are like myself unable to get exemptions.
Jocelyn
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Jocelynsaid:
“I agree with Peasie and Kris.
I am not working at present and due to financial restraints, I am unable to afford to update my membership to the level I have achieved with the ICB exams, (I have just passed level 3 manual) so I am still a Student.
I achieved my AAT qualification and have years of experience. Much of Level 4 Diploma in Financial Management I studied with the AAT and have used during my working life.
Remember that there are members who have to be Student, Affiliate or Associate member's because they have not yet passed the exams, have other qualifications and years of experience, but are like myself unable to get exemptions.
Jocelyn
”
I red threads above and I must admit this is happening over and over again.
I was a student too even though I could have taken the exemption route! Will be taking Level 3 soon even though I have already studied the subject to pass my degree!
I have been a professional for eight years!
Thanks Jocelyn for the gentle friendly reminder...I would also add that those members are also entitled to help anyone raising question. Should their answer not be correct, let's just correct it.
Kind Regards,
Nathaliexxx
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LOL
Kris at no point did I question any of the replies that had been given as being either correct or incorrect. And for the record Kris if you read your reply to his post it did not really answer the question he was asking what value to start depreciating the asset at rather than what cost should be shown on the balance sheet as you will note both DavieR and Lesley did in fact answer the question that was being asked.
Again it others who are making assumptions as to my intentions when posting I do find it staggering that we have people who are seem to be far more capable than their level of qualification would suggest. I often wonder why people stick at the AICB level rather than pushing onto level 3 and now even going for gold with level 4.
Jocelyn I had never considered your very valid point that there are members who for financial reasons will have not upgrade their membership. Can I just ask if you have years of experience and passed AAT why you elected to become a member by examination rather than exemption (No reflection or comment being inferred just interested to find out).
The whole point of there being the Level 3 section is for the benefit of the student members to be able to ask questions when they get stuck so that others may reply to help them. I am not adverse to ANYONE replying in answer to any question so long as they do not give an incorrect answer that may mislead or confuse the poster any more than they may already may be.
So in closing rather than just jumping to conclusions to the intention of a posting ask the question. You will also find if read some of the 400 odd posts I have made if I am not in agreement or unhappy about something I do tend to make it clear and also try to give my reason's.
things can be staggeringly beautiful as well as staggeringly ugly.
Thank you
Stuart
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Stuart Wildmansaid:
“
LOL
Kris at no point did I question any of the replies that had been given as being either correct or incorrect. And for the record Kris if you read your reply to his post it did not really answer the question he was asking what value to start depreciating the asset at rather than what cost should be shown on the balance sheet as you will note both DavieR and Lesley did in fact answer the question that was being asked.
Again it others who are making assumptions as to my intentions when posting I do find it staggering that we have people who are seem to be far more capable than their level of qualification would suggest. I often wonder why people stick at the AICB level rather than pushing onto level 3 and now even going for gold with level 4.
Jocelyn I had never considered your very valid point that there are members who for financial reasons will have not upgrade their membership. Can I just ask if you have years of experience and passed AAT why you elected to become a member by examination rather than exemption (No reflection or comment being inferred just interested to find out).
The whole point of there being the Level 3 section is for the benefit of the student members to be able to ask questions when they get stuck so that others may reply to help them. I am not adverse to ANYONE replying in answer to any question so long as they do not give an incorrect answer that may mislead or confuse the poster any more than they may already may be.
So in closing rather than just jumping to conclusions to the intention of a posting ask the question. You will also find if read some of the 400 odd posts I have made if I am not in agreement or unhappy about something I do tend to make it clear and also try to give my reason's.
things can be staggeringly beautiful as well as staggeringly ugly.
Thank you
Stuart
”
Perhaps in both our cases clarity is the key then, in mine in fully answering a question rather than hinting at it, and in yours explaining fully what you mean by a word you obvoiusly know can be open to interpretation. And in this case would appear to have been interpreted the same way by all.
Kris
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Clarity is certainly the key - as my own posting in response to the original question shows.
I have had a discussion this morning with Stuart, he has given his interpretation of the answer, which generally accords with others that have been given. But in our conversation I have given an alternative answer which could equally be correct.
Which is why, so far, I haven’t got into the debate as to who or what is right or wrong.
What I would like to see, not only for this question but for all questions asked on the forum, especially where they are specific rather than hypothetical, is for the exact wording (provided of course it is not an exam question).
On another thread I gave an answer in relation to VAT which then became very confusing because the figure were changed in a further posting and VAT was shown at 17.5% instead of 20%.
So if confused can verify that the original posting is verbatim it would help (me at least), if it was not verbatim can we now have it and also any feedback from the tutor - because that may prove everyone right, everyone wrong, some right or some wrong - and ease my confusion.
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