Record asset purchases and depreciation in ledger accounts
Journalise asset acquisitions, post depreciation to the expense and provision accounts, and calculate carrying value.
Section 4.2 · Depreciation and disposal of non-current assets
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
How is net book value calculated when a provision for depreciation is used?
What you will learn
- Journalise a non-current asset purchase paid in cash or on credit
- Post depreciation to the expense and provision accounts
- Calculate net book value from cost and accumulated depreciation
Record the purchase before later depreciation
For a cash purchase of a non-current asset, debit the relevant asset account and credit Bank. For a credit purchase, credit the supplier or other payable instead. The purchase price is not a period expense merely because cash was paid.
Post the amount to the non-current asset account at cost. Later depreciation is recorded separately, so the acquisition does not remove the asset's cost from the ledger.
Keep cost and accumulated depreciation separate
The non-current asset account records the asset at cost or valuation. The provision for depreciation account accumulates depreciation charged over time; net book value is asset cost less accumulated depreciation.
The period's entry is normally debit Depreciation expense and credit Provision for depreciation. This records the expense for the period and increases the accumulated provision without reducing the asset's original cost account.
Transfer the expense and calculate carrying value
Depreciation expense is transferred to the statement of profit or loss for the period. The provision remains as a deduction from the asset in the statement of financial position.
For example, cost $12,000 less accumulated depreciation $3,200 gives net book value $8,800. Keep the period's expense separate from the total accumulated provision.
Pause and explain
Cost is $8,500 and accumulated depreciation is $2,700. What is net book value?
Worked example
A business buys a machine for $12,000 on credit. At year-end it has accumulated depreciation of $3,200 and charges $1,500 for the year. State the entries, closing provision and net book value.
Show the worked solution
- On purchase: Dr Machinery $12,000; Cr Trade payables $12,000. The acquisition is recorded as an asset, not as a running expense.
- For the year: Dr Depreciation expense $1,500; Cr Provision for depreciation $1,500. Closing provision = 3,200 + 1,500 = $4,700.
- Net book value = 12,000 − 4,700 = $7,300.
Answer Purchase: Dr Machinery $12,000; Cr Trade payables $12,000. Depreciation: Dr Depreciation expense $1,500; Cr Provision for depreciation $1,500. Closing provision $4,700; net book value $7,300.
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Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Equipment cost $20,000 and accumulated depreciation before the year is $5,600. The year's depreciation is $2,400. Give the entry and closing carrying amount.
Give me a hint
Add this year's charge to the provision, then subtract it from cost.
Compare my reasoning
- Dr Depreciation expense $2,400; Cr Provision $2,400.
- Closing provision = 5,600 + 2,400 = $8,000.
- Net book value = 20,000 − 8,000 = $12,000.
Entry: Dr Depreciation expense $2,400; Cr Provision $2,400. Closing provision $8,000; net book value $12,000.
Look for these in your work
- Entry sides correct
- Provision correct
- Carrying value correct
A business acquires a $14,000 machine on 30-day credit and buys $6,000 of equipment by bank transfer. Give the entries and identify the additions to the non-current asset ledger.
Give me a hint
Record each asset at cost and credit the account that provided the finance or payment.
Compare my reasoning
- Credit purchase: Dr Machinery $14,000; Cr Trade payables $14,000.
- Cash purchase: Dr Equipment $6,000; Cr Bank $6,000.
- The non-current asset accounts show additions of $14,000 and $6,000 respectively; depreciation is calculated separately under the stated method and timing.
Machinery: Dr $14,000 / Cr Trade payables $14,000. Equipment: Dr $6,000 / Cr Bank $6,000. Record $20,000 total asset additions in their respective accounts; do not charge the purchases as period expenses.
Look for these in your work
- Cash and credit entries correct
- Asset accounts identified
- Depreciation kept separate
A machine cost $9,600 and its accumulated provision is $3,840. Explain the carrying amount and one reason it is not necessarily its market value.
Give me a hint
Subtract accumulated depreciation; carrying amount follows the accounting records and method.
Compare my reasoning
- Net book value = 9,600 − 3,840 = $5,760.
- Depreciation allocates cost over use; it is not a market valuation.
- Actual resale value may differ from the carrying amount.
Net book value is $5,760; it is an accounting carrying amount and may differ from current market value.
Look for these in your work
- Subtraction correct
- Purpose distinguished
- Market-value limit stated
Common mistakes
- Charging a non-current asset purchase as a period expense
- Crediting the asset cost account for the annual charge when using a provision account
- Using only this year's charge to calculate net book value
- Transferring accumulated depreciation as though it were the period expense
What can you explain now?
What does the provision for depreciation account represent?
Compare with the explanation
Accumulated depreciation to date
It accumulates the charges recorded over the asset's periods of use.
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Make it stick
Why is an accumulated provision different from this year's depreciation expense?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.