Why is "Using cost instead of carrying value for reducing balance" a common mistake in Adjustments for Depreciation?

Why it happens: Mixing up the two methods. How to avoid it: Reducing balance applies the rate to the CARRYING VALUE (cost − provision b/f); straight-line applies it to cost. Source: 9706 Examiner Reports

Why is "Forgetting the provision brought forward" a common mistake in Adjustments for Depreciation?

Why it happens: Only using this year's charge. How to avoid it: Accumulated depreciation in the SOFP = provision b/f + this year's charge. Source: 9706 Examiner Reports

Why is "Crediting the depreciation to the asset account" a common mistake in Adjustments for Depreciation?

Why it happens: Thinking it reduces the asset directly. How to avoid it: Credit the PROVISION for depreciation; the asset account stays at cost. Source: 9706 Examiner Reports

Why is "Showing depreciation in only one statement" a common mistake in Adjustments for Depreciation?

Why it happens: Treating it as just an expense. How to avoid it: It affects BOTH: an expense in the SOPL and a lower carrying value in the SOFP. Source: 9706 Examiner Reports

Why is "Not allocating company depreciation between expense headings" a common mistake in Adjustments for Depreciation?

Why it happens: Charging the whole amount to one heading. How to avoid it: Split the charge between distribution costs and administrative expenses as instructed. Source: 9706 Examiner Reports

Why is "Forgetting to deduct the charge from draft profit" a common mistake in Adjustments for Depreciation?

Why it happens: Calculating the charge but not adjusting profit. How to avoid it: The depreciation charge is an expense — deduct it from draft profit to get the corrected profit. Source: 9706 Examiner Reports

Cambridge International A Levels Accounting (9706)

Adjustments for Depreciation

0% Complete

Detailed Study Notes

Detailed notes on Adjustments to Draft Financial Statements for Cambridge International A Levels Accounting, covering key concepts, explanations, examples, and exam-focused revision points.

Adjustments for Depreciation — Cambridge AS & A Level Accounting 9706 Study Notes (2026-2028)

How the depreciation adjustment flows through a set of draft financial statements. Learn to read a trial balance (asset at cost, provision brought forward), calculate the year's charge, record the adjustment, and show it correctly in both the statement of profit or loss and the statement of financial position.

At a glance

The adjustment: Dr Depreciation (expense), Cr Provision for depreciation.
In the trial balance, the asset appears at cost and the provision is the accumulated depreciation brought forward.
Calculate this year's charge using the stated method (straight-line / reducing balance).
Statement of profit or loss: the year's depreciation is an expense.
Statement of financial position: asset at cost LESS accumulated depreciation (b/f + this year) = carrying value.
Omitting the adjustment overstates profit and net assets.
In a company, the charge is allocated between distribution costs and administrative expenses.

What you’ll learn

Mapped to the Cambridge International A Level 9706 syllabus (2026-2028).

1.5.1 — Calculate and record the adjustment needed and the effect on the financial statements in respect of depreciation.
Show depreciation in the statement of profit or loss and the statement of financial position.
Link 1.3.2 — the methods (straight-line, reducing balance) used to calculate the charge.

Reading the trial balance

The asset is at cost; the provision is last year's accumulated depreciation.

When preparing financial statements from a trial balance, depreciation usually appears in two places, plus a note:

Non-current asset at cost — a debit balance (e.g. Machinery $80,000).
Provision for depreciation — a credit balance = the accumulated depreciation brought forward (e.g. $24,000).
A note tells you the method and rate to apply this year (e.g. '20% reducing balance' or '10% straight-line on cost').

The job: use the note to calculate this year's charge, then:

add it to the provision (accumulated depreciation), and
charge it as an expense in the statement of profit or loss.

The trial balance gives you the starting point; the note tells you the adjustment to make.

Asset at cost = a debit balance in the trial balance.
Provision for depreciation = accumulated depreciation b/f (a credit balance).
A note gives the method and rate for this year's charge.
Calculate this year's charge, then adjust both statements.

See the full worked example for adjustments for depreciation →

Recording the adjustment

Debit the depreciation expense; credit the provision for depreciation.

The double entry for the year's depreciation is always:

	Dr	Cr
Depreciation (expense)	X
Provision for depreciation		X

The expense is transferred to the statement of profit or loss.
The provision is increased; its new balance = accumulated depreciation b/f + this year's charge.

Reducing balance reminder: for reducing balance, the charge = (cost − accumulated depreciation b/f) × rate, i.e. the carrying value at the start of the year × the rate. For straight-line on cost, the charge = cost × rate (the same each year).

Dr Depreciation (expense); Cr Provision for depreciation.
Expense → statement of profit or loss.
New provision = accumulated depreciation b/f + this year's charge.
Reducing balance uses the carrying value; straight-line uses cost.

See the full worked example for adjustments for depreciation →

Showing it in the financial statements

Expense in the SOPL; cost less accumulated depreciation in the SOFP.

Statement of profit or loss:

The year's depreciation charge is an expense (reducing profit). In a sole trader's statement it is listed among the expenses; in a company's it is included in distribution costs and/or administrative expenses.

Statement of financial position (non-current assets):

	Cost $	Accumulated depreciation $	Carrying value $
Machinery	80 000	24 000 + this year	(cost − accumulated)

The accumulated depreciation = brought forward + this year's charge.
Carrying value = cost − accumulated depreciation.

So one adjustment touches both statements: an expense in the SOPL and a lower carrying value in the SOFP.

SOPL: the year's charge is an expense.
SOFP: cost − (accumulated b/f + this year) = carrying value.
In a company, the charge is allocated to distribution/admin expenses.
One adjustment affects both statements.

See the full worked example for adjustments for depreciation →

The effect of getting it wrong

Omitting or miscalculating depreciation misstates profit and net assets.

Because depreciation touches both statements, an error has a double effect:

Omitting the charge → no expense → profit overstated; and the provision is too low → carrying value (and net assets) overstated.
Overcharging → too much expense → profit understated; carrying value understated.
Using the wrong method/rate → the charge, profit and carrying value are all wrong by the difference.

This is why the depreciation adjustment must be calculated carefully and shown in both statements — it is a frequent source of marks (and of errors). It applies the matching and prudence concepts.

Omitting depreciation overstates profit AND net assets.
Overcharging understates profit and carrying value.
Wrong method/rate misstates the charge, profit and carrying value.
Applies matching and prudence; affects both statements.

See the full worked example for adjustments for depreciation →

Quick recap

Adjustment: Dr Depreciation (expense), Cr Provision for depreciation.
Trial balance gives the asset at cost and the provision b/f; a note gives the method/rate.
Calculate this year's charge (reducing balance uses carrying value; straight-line uses cost).
SOPL: the charge is an expense; SOFP: cost − accumulated depreciation = carrying value.
In a company, allocate the charge to distribution and administrative expenses.
Omitting depreciation overstates both profit and net assets.

Memorise this

Verbatim phrases and definitions Cambridge mark schemes credit.

Dr Depreciation (expense); Cr Provision for depreciation.
New provision = accumulated depreciation b/f + this year's charge.
SOFP: cost − accumulated depreciation = carrying value.
Omitting depreciation overstates profit AND net assets.

How it’s examined

Tested on Paper 2 and Paper 3 as part of preparing financial statements: calculate the year's depreciation from the trial balance + note, show it as an expense, and present non-current assets at carrying value (typically embedded in a larger [12-16] mark statement). Examiner reports note candidates using the wrong base (cost vs carrying value) and forgetting the brought-forward provision.

Sources: Cambridge International AS & A Level Accounting 9706 syllabus (2026-2028); 9706/22 Paper 2 question paper & mark scheme, Feb/Mar 2024; 9706 Examiner Reports, 2022-2024. Last reviewed 2026-06-17.

Take this whole topic with you

Step-by-step worked examples — Adjustments for Depreciation

Step-by-step solutions to past-paper-style questions on adjustments for depreciation, written exactly the way a tutor would explain them at the board.

Question type:

1Charge from a trial balance (4 marks)
Getting startedMulti-step problem• 9706 Paper 2 style• depreciation, AO2
Question
Trial balance: machinery at cost $90,000; provision for depreciation$ 30,000. Machinery is depreciated at 20% reducing balance. Calculate this year's depreciation charge. (4 marks)
Step-by-step solution
1. Step 1
  Carrying value at start = cost − provision = 90,000 − 30,000 = 60,000.
2. Step 2
  Reducing balance: charge = 20% × carrying value = 20% × 60,000.
3. Step 3
  = $12,000.
Answer
This year's depreciation charge = $12,000.
Examiner tip
Reducing balance uses the carrying value (cost − provision), not cost.
2Record the adjustment (3 marks)
Getting startedMulti-step problem• journal, AO1
Question
The depreciation charge for the year is $12,000. Prepare the journal entry (narrative not required) and state where each figure appears. (3 marks)
Step-by-step solution
1. Step 1
  Dr Depreciation (expense) 12,000 → statement of profit or loss.
2. Step 2
  Cr Provision for depreciation 12,000 → increases accumulated depreciation.
3. Step 3
  The asset stays at cost in the statement of financial position.
Answer
Dr Depreciation $12,000 (SOPL expense); Cr Provision for depreciation$ 12,000 (SOFP, reduces carrying value).
Examiner tip
Credit the provision, not the asset.
3Show it in both statements (5 marks)
Building confidenceMulti-step problem• statements, AO2
Question
Machinery at cost $90,000; provision b/f$ 30,000; this year's charge $12,000. State (a) the amount in the statement of profit or loss and (b) how machinery appears in the statement of financial position. (5 marks)
Step-by-step solution
1. Step 1
  (a) Depreciation expense $12,000 in the statement of profit or loss.
2. Step 2
  (b) Accumulated depreciation = 30,000 + 12,000 = 42,000.
3. Step 3
  Carrying value = 90,000 − 42,000 = $48,000.
4. Step 4
  SOFP: machinery cost 90,000, accumulated depreciation 42,000, carrying value 48,000.
Answer
(a) $12,000 expense; (b) cost$ 90,000, accumulated depreciation $42,000, carrying value$ 48,000.
Examiner tip
Add this year's charge to the provision b/f before finding the carrying value.
4Straight-line adjustment (4 marks)
Building confidenceMulti-step problem• depreciation, AO2
Question
Trial balance: equipment at cost $50,000; provision for depreciation$ 15,000. Equipment is depreciated at 10% per year straight-line on cost. Calculate this year's charge and the closing carrying value. (4 marks)
Step-by-step solution
1. Step 1
  Straight-line on cost: charge = 10% × 50,000 = $5,000.
2. Step 2
  Accumulated depreciation = 15,000 + 5,000 = 20,000.
3. Step 3
  Carrying value = 50,000 − 20,000 = $30,000.
Answer
Charge $5,000; carrying value$ 30,000.
Examiner tip
Straight-line on cost gives the same charge each year, regardless of the provision.
5Allocate the charge in a company (5 marks)
Building confidenceMulti-step problem• allocation, AO2
Question
A company's equipment (cost $120,000, provision$ 48,000) is depreciated at 25% reducing balance. The charge is allocated 60% to administrative expenses and 40% to distribution costs. Calculate the amount in each. (5 marks)
Step-by-step solution
1. Step 1
  Carrying value = 120,000 − 48,000 = 72,000.
2. Step 2
  Charge = 25% × 72,000 = 18,000.
3. Step 3
  Administrative expenses = 60% × 18,000 = $10,800.
4. Step 4
  Distribution costs = 40% × 18,000 = $7,200.
Answer
Total $18,000:$ 10,800 administrative expenses, $7,200 distribution costs.
Examiner tip
Calculate the total charge first, then split it as instructed.
6Adjustment with an addition (6 marks)
StretchMulti-step problem• depreciation, AO2
Question
Vehicles at cost $80,000; provision$ 35,000. A new vehicle costing $20,000 was bought during the year (included in the$ 80,000 cost). Vehicles are depreciated at 20% on cost, with a full year's charge on all vehicles held at the year end. Calculate this year's charge. (6 marks)
Step-by-step solution
1. Step 1
  All vehicles held at the year end get a full year's charge.
2. Step 2
  Total cost at the year end = $80,000 (already includes the new vehicle).
3. Step 3
  Charge = 20% × 80,000 = $16,000.
4. Step 4
  (Straight-line on cost, so the provision b/f does not change the charge.)
Answer
This year's charge = $16,000.
Examiner tip
On a full-year, straight-line-on-cost basis, apply the rate to the total year-end cost.
7Effect of omitting depreciation (5 marks)
StretchWord problem• effect, AO2
Question
A business omitted the year's depreciation charge of $9,000 from its draft financial statements. State the effect on (a) the profit, (b) the carrying value of the asset, and (c) capital. (5 marks)
Step-by-step solution
1. Step 1
  (a) No expense charged → profit overstated by $9,000.
2. Step 2
  (b) Provision not increased → carrying value overstated by $9,000.
3. Step 3
  (c) The overstated profit raises capital → capital overstated by $9,000.
4. Step 4
  Both statements are wrong — profit and net assets overstated.
Answer
Profit overstated $9,000; carrying value overstated$ 9,000; capital overstated $9,000.
Examiner tip
Omitting depreciation overstates both profit and net assets by the charge.
8Two assets, two methods (6 marks)
StretchMulti-step problem• depreciation, AO2
Question
Buildings cost $200,000 (no provision; 2% straight-line on cost). Machinery cost$ 60,000, provision $21,600 (25% reducing balance). Calculate the total depreciation charge for the year. (6 marks)
Step-by-step solution
1. Step 1
  Buildings: 2% × 200,000 = $4,000.
2. Step 2
  Machinery carrying value = 60,000 − 21,600 = 38,400.
3. Step 3
  Machinery: 25% × 38,400 = $9,600.
4. Step 4
  Total = 4,000 + 9,600 = $13,600.
Answer
Total depreciation charge = $13,600.
Examiner tip
Apply the correct base to each asset (cost for straight-line; carrying value for reducing balance).
9Concepts behind the adjustment (4 marks)
StretchWord problem• concepts, AO3
Question
Explain, with reference to two accounting concepts, why the depreciation adjustment is made when preparing the financial statements. (4 marks)
Step-by-step solution
1. Step 1
  Matching: the cost of using the asset this year is charged against this year's revenue.
2. Step 2
  Spreading the cost over the asset's life matches it to the periods that benefit.
3. Step 3
  Prudence: charging depreciation avoids overstating the asset and the profit.
4. Step 4
  Together they give a true and fair view of performance and position.
Answer
Matching (charge the cost of using the asset this year) and prudence (don't overstate the asset/profit).
Examiner tip
Name and apply matching and prudence to the depreciation adjustment.
10Full adjustment from a trial balance (7 marks)
StretchMulti-step problem• statements, AO2
Question
Trial balance: fixtures at cost $40,000; provision for depreciation – fixtures$ 16,000; draft profit before this adjustment $55,000. Fixtures are depreciated at 25% reducing balance. Calculate (a) the depreciation charge, (b) the corrected profit, and (c) the carrying value of fixtures. (7 marks)
Step-by-step solution
1. Step 1
  (a) Carrying value = 40,000 − 16,000 = 24,000; charge = 25% × 24,000 = $6,000.
2. Step 2
  (b) Corrected profit = 55,000 − 6,000 = $49,000 (the charge is an expense).
3. Step 3
  (c) Accumulated depreciation = 16,000 + 6,000 = 22,000; carrying value = 40,000 − 22,000 = $18,000.
Answer
(a) $6,000; (b) corrected profit$ 49,000; (c) carrying value $18,000.
Examiner tip
Deduct the charge from profit AND add it to the provision before finding carrying value.

Model Answers — Adjustments for Depreciation

High-scoring sample answers for adjustments for depreciation on the Cambridge IGCSE paper, with examiner-style notes mapping each response to the mark scheme and assessment objectives.

Question 1
9706 Paper 2 style3 marks
Q (3 marks). Trial balance: machinery at cost $70,000; provision for depreciation$ 28,000. Machinery is depreciated at 25% reducing balance. Calculate this year's depreciation charge.
Model answer
Carrying value = 70,000 − 28,000 = $42,000. Charge = 25% × 42,000 = $10,500.
Why this scores
Marking (point-based, 3). Carrying value $42,000 (1); apply 25% (1);$ 10,500 (1).
Question 2
9706 Paper 2 style3 marks
Q (3 marks). The depreciation charge for the year is $10,500. Prepare the journal entry and state where each figure appears in the financial statements.
Model answer

Dr $ Cr $
Depreciation (expense) 10 500
Provision for depreciation 10 500

The $10,500 is an expense in the statement of profit or loss; the provision increases, reducing the carrying value in the statement of financial position.
Why this scores
Marking (point-based, 3). Dr Depreciation (1); Cr Provision (1); SOPL expense + SOFP carrying value (1).
Question 3
9706 Paper 2 style5 marks
Q (5 marks). Equipment at cost $100,000; provision for depreciation$ 40,000; depreciated at 20% reducing balance. Show (a) the depreciation expense for the year and (b) how equipment appears in the statement of financial position.
Model answer
Carrying value = 100,000 − 40,000 = 60,000; charge = 20% × 60,000 = $12,000.

(a) Depreciation expense = $12,000 in the statement of profit or loss.

(b) Statement of financial position:

Cost $ Accumulated depreciation $ Carrying value $
Equipment 100 000 52 000 48 000

(Accumulated depreciation = 40,000 + 12,000 = 52,000; carrying value = 48,000.)
Why this scores
Marking (point-based, 5). Charge $12,000 (2); accumulated$ 52,000 (1.5); carrying value $48,000 (1.5).
Question 4
9706 Paper 3 style5 marks
Q (5 marks). A company depreciates its delivery vehicles (cost $150,000, provision$ 54,000) at 25% reducing balance. The charge is allocated wholly to distribution costs. Its office equipment (cost $40,000) is depreciated at 10% straight-line on cost, charged to administrative expenses. Calculate the depreciation in distribution costs and in administrative expenses.
Model answer
Delivery vehicles: carrying value = 150,000 − 54,000 = 96,000; charge = 25% × 96,000 = $24,000 → distribution costs.

Office equipment: 10% × 40,000 = $4,000 → administrative expenses.

Distribution costs: $24,000; administrative expenses: $4,000.
Why this scores
Marking (point-based, 5). Vehicles carrying value $96,000 (1) + charge$ 24,000 (2); equipment $4,000 (1); correct allocation (1).
Question 5
9706 Paper 3 style6 marks
Q (6 marks). A draft statement of profit or loss shows a profit of $84,000 before depreciation. Machinery (cost$ 120,000, provision $48,000) is to be depreciated at 25% reducing balance, and buildings (cost$ 300,000, no provision) at 2% straight-line on cost. Calculate the corrected profit.
Model answer
Machinery: carrying value = 120,000 − 48,000 = 72,000; charge = 25% × 72,000 = $18,000. Buildings: 2% × 300,000 = $6,000. Total depreciation = 18,000 + 6,000 = $24,000.

Corrected profit = 84,000 − 24,000 = $60,000.
Why this scores
Marking (point-based, 6). Machinery $18,000 (2); buildings$ 6,000 (1.5); total $24,000 (1); corrected profit$ 60,000 (1.5).
Question 6
9706 Paper 2/3 style5 marks
Q (5 marks). Explain the effect on a sole trader's financial statements of failing to charge depreciation of $11,000 for the year.
Model answer
Statement of profit or loss. No depreciation expense is charged, so expenses are understated by $11,000 and the profit for the year is overstated by $11,000.

Statement of financial position.

The provision for depreciation is understated, so the asset's carrying value is overstated by $11,000.

The overstated profit increases capital, so capital (net assets) is overstated by $11,000.

The omission therefore overstates both profit and net assets, breaching the matching and prudence concepts.
Why this scores
Marking (point-based, 5). Expenses understated/profit overstated $11,000 (2); carrying value overstated (1.5); capital overstated (1); concepts (0.5).
Question 7
9706 Paper 3 style6 marks
Q (6 marks). At 1 January, machinery cost $90,000 and the provision was$ 30,000. On 1 July a new machine costing $24,000 was bought. Machinery is depreciated at 20% per year straight-line on cost, charged month-by-month. Calculate the total depreciation charge for the year ended 31 December.
Model answer
Existing machinery ($90,000): full year = 20% × 90,000 = $18,000.

New machine ($24,000), owned 6 months (July–December): 20% × 24,000 × 6/12 = $2,400.

Total depreciation charge = 18,000 + 2,400 = $20,400.
Why this scores
Marking (point-based, 6). Existing $18,000 (2); new machine 6 months$ 2,400 (3); total $20,400 (1). Straight-line on cost, so the provision b/f doesn't affect the charge.
Question 8
9706 Paper 2/3 style4 marks
Q (4 marks). Explain, with reference to accounting concepts, why depreciation must be charged when preparing the financial statements.
Model answer
Matching (accruals). A non-current asset is used over several years to earn revenue, so the matching concept requires its cost to be spread (as depreciation) over those years, charging part of the cost against each year's revenue.

Prudence. Charging depreciation ensures the asset is not overstated in the statement of financial position and the profit is not overstated, giving a more realistic, cautious view.
Why this scores
Marking (point-based, 4). Matching applied to depreciation (~2); prudence applied (~2).
Question 9
9706 Paper 3 style6 marks
Q (6 marks). Trial balance: motor vehicles at cost $64,000; provision for depreciation – motor vehicles$ 25,600; draft profit (before this adjustment) $48,000. Motor vehicles are depreciated at 25% reducing balance. Calculate (a) the depreciation charge, (b) the corrected profit, and (c) the carrying value of motor vehicles for the statement of financial position.
Model answer
(a) Carrying value = 64,000 − 25,600 = 38,400; charge = 25% × 38,400 = $9,600.

(b) Corrected profit = 48,000 − 9,600 = $38,400.

(c) Accumulated depreciation = 25,600 + 9,600 = 35,200; carrying value = 64,000 − 35,200 = $28,800.
Why this scores
Marking (point-based, 6). Charge $9,600 (2); corrected profit$ 38,400 (2); carrying value $28,800 (2).
Question 10
9706 Paper 2 style2 marks
Q (2 marks). State the base to which the depreciation rate is applied under (a) the straight-line method and (b) the reducing balance method.
Model answer
(a) Straight-line: the cost of the asset (the same charge each year). (b) Reducing balance: the carrying value (cost − accumulated depreciation), giving a falling charge.
Why this scores
Marking (point-based, 2). 1 mark each — cost for straight-line, carrying value for reducing balance.

	Dr $	Cr $
Depreciation (expense)	10 500
Provision for depreciation		10 500

	Cost $	Accumulated depreciation $	Carrying value $
Equipment	100 000	52 000	48 000

Key Definitions and Keywords — Adjustments for Depreciation

Definitions to memorise and the exact keywords mark schemes credit for adjustments for depreciation answers — sharpened from recent examiner reports for the 2026 Cambridge IGCSE sitting.

Depreciation adjustment
Examiner keyword
The year-end entry charging depreciation: Dr Depreciation (expense), Cr Provision for depreciation.
Provision brought forward
Examiner keyword
The accumulated depreciation at the start of the year, shown as a credit balance in the trial balance.
Depreciation charge
Examiner keyword
This year's depreciation, calculated using the stated method/rate and shown as an expense in the statement of profit or loss.
Carrying value
Examiner keyword
Cost less accumulated depreciation (brought forward + this year's charge); shown in the statement of financial position.
Allocation of depreciation
In a company, splitting the depreciation charge between distribution costs and administrative expenses according to how the asset is used.

Common Mistakes and Misconceptions — Adjustments for Depreciation

The traps other students keep falling into on adjustments for depreciation questions — taken from recent Cambridge IGCSE examiner reports and mark schemes — and how to avoid them.

✕Using cost instead of carrying value for reducing balance
9706 Examiner Reports
Why it happens
Mixing up the two methods.
How to avoid it
Reducing balance applies the rate to the CARRYING VALUE (cost − provision b/f); straight-line applies it to cost.
✕Forgetting the provision brought forward
9706 Examiner Reports
Why it happens
Only using this year's charge.
How to avoid it
Accumulated depreciation in the SOFP = provision b/f + this year's charge.
✕Crediting the depreciation to the asset account
9706 Examiner Reports
Why it happens
Thinking it reduces the asset directly.
How to avoid it
Credit the PROVISION for depreciation; the asset account stays at cost.
✕Showing depreciation in only one statement
9706 Examiner Reports
Why it happens
Treating it as just an expense.
How to avoid it
It affects BOTH: an expense in the SOPL and a lower carrying value in the SOFP.
✕Not allocating company depreciation between expense headings
9706 Examiner Reports
Why it happens
Charging the whole amount to one heading.
How to avoid it
Split the charge between distribution costs and administrative expenses as instructed.
✕Forgetting to deduct the charge from draft profit
9706 Examiner Reports
Why it happens
Calculating the charge but not adjusting profit.
How to avoid it
The depreciation charge is an expense — deduct it from draft profit to get the corrected profit.

Adjustments for Depreciation

Detailed Study Notes

At a glance

What you’ll learn

Quick recap

Memorise this

How it’s examined

Take this whole topic with you

1Charge from a trial balance (4 marks)

2Record the adjustment (3 marks)

3Show it in both statements (5 marks)

4Straight-line adjustment (4 marks)

5Allocate the charge in a company (5 marks)

6Adjustment with an addition (6 marks)

7Effect of omitting depreciation (5 marks)

8Two assets, two methods (6 marks)

9Concepts behind the adjustment (4 marks)

10Full adjustment from a trial balance (7 marks)

Depreciation adjustment

Provision brought forward

Depreciation charge

Carrying value

Allocation of depreciation

✕Using cost instead of carrying value for reducing balance

✕Forgetting the provision brought forward

✕Crediting the depreciation to the asset account

✕Showing depreciation in only one statement

✕Not allocating company depreciation between expense headings

✕Forgetting to deduct the charge from draft profit