# IGCSE Accounting Paper-2: Specimen Questions with Answers 157 - 158 of 189

## Question number: 157

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### Write in Short

Explain the straight line method of depreciation. Also show through an example how annual depreciation is worked out under this method. (Marks 4)

### Explanation

Under straight line method, an equal amount of depreciation as a fixed percentage of the cost of the asset is charged to the P&L A/c over the years till the balance of the asset gets zero or reduced to its scrap value. The annual depreciation under this method is worked out through the following formula-

For Example, if a machine costing \$4200 is estimated to have a life of 10 years and its scrap value is estimated to be \$200 at the end of the tenth year. Then the annual depreciation on the machine would be

## Passage

Mohan Bhagwat’s is a businessman who closes his accounts on 30 June every year. He does not maintain a full set of accounting records.

All goods are bought and sold on credit terms.

He provided the following information.

 \$ For the year ended 30 June 2019: Payments to Trade creditors 42300 Receipts from Trade debtors 55200 Discount allowed to Trade debtors 700 Purchases Returns 1400 Bad debts written off 70 Carriage inwards 3000 On 1 July 2018: Trade Creditors 1600 Trade Debtors 3500 Inventory 1100 On 30 June 2019: Trade Creditors 2200 Trade Debtors 4130

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